Wharton’s Jeremy Siegel says the Dow could surpass 40,000—if the Fed doesn’t get in the way

Sheryl EstradaBy Sheryl EstradaSenior Writer and author of CFO Daily
Sheryl EstradaSenior Writer and author of CFO Daily

Sheryl Estrada is a senior writer at Fortune, where she covers the corporate finance industry, Wall Street, and corporate leadership. She also authors CFO Daily.

Scott Mlyn—CNBC/NBCU Photo Bank/NBCUniversa/Getty Images

Good morning.

This week, I’ve been sharing predictions for 2024 from CFOs and industry analysts—and I think a veteran market watcher’s economic forecast also provides some food for thought.

“We do have a slowing economy now,” Wharton finance professor Jeremy Siegel said last week on the Wharton Business Daily radio show on SiriusXM’s Business Radio channel. The Federal Reserve must realize that “all its tightness is in the pipeline and will press on the economy in 2024, so they have to start thinking about lowering rates,” Siegel said.

In its Dec. 13 meeting, the Federal Reserve announced it would leave the benchmark overnight borrowing rate unchanged—the third straight pause since July—in a targeted range from 5.25% to 5.5%, signaling possible cuts later this year. (Inflation remains above the 2% target set by the Fed, which next meets Jan. 30-31.)

Bu inflation is basically beat, Siegel said. “There will be core elements in the CPI that will continue to rise, and institutionally determined prices that take months to come down, but to eliminate those remaining price increases would mean crushing the economy—and that would be inadvisable from an economic standpoint,” he said.

“My big hope is that the Fed doesn’t get stuck on the downside and delay [taking action] the way it did on the upside, tightening way too late in [2021 and 2022],” Siegel added. “Even if they don’t lower interest rates in January, they may have to lower it in the March meeting.”

The Dow Jones Industrial Average closed the year at 37,689. On Thursday, it closed at 37,440.

“We could definitely get it past 40,000,” Siegel continued. “A 10% to 12% rise in stock prices is not out of the question for 2024.”

But, he added, that may be contingent on declining interest rates. “If the Fed is stubborn and says, ‘I’m just going against inflation, even if the data gets soft,’ those figures would have to be adjusted downward…if the Fed keeps money [supply] stagnant, as it has been, you are looking at a recession right in the face. That is why the Fed must ease.”

Productivity gains seen in 2023 also may continue, and “we could have higher labor force participation,” Siegel added. The Bureau of Labor Statistics’ final jobs report for 2023 is set to be released this morning.

ADP’s monthly analysis of payroll data released on Thursday found around 164,000 jobs were created in the private sector last month, up from 103,000 in November, and annual pay rose 5.4% year over year. “We’re returning to a labor market that’s very much aligned with pre-pandemic hiring,” Nela Richardson, ADP’s chief economist, said in a statement.

Readers predict: Earlier this week, I asked readers for predictions on how the CFO role would continue to change. Here’s one response about how artificial intelligence could prove a factor:

“As companies get to understand the inestimable value of AI and begin to gradually adopt and implement it, CFOs will have a lot to grapple with, especially with budgets to fund safety and protection of company data.” —Helen Uju Ogboh, group head (manufacturing), corporate banking directorate, First Bank of Nigeria Limited

Have a good weekend.

Sheryl Estrada
sheryl.estrada@fortune.com

Leaderboard

Some notable moves:

Kate Clune was named CFO at Piper Sandler Companies (NYSE: PIPR), an investment bank, effective Jan. 1, 2024. Clune succeeds Tim Carter, who will remain with the firm through April to assist with the transition. Clune joins the firm from Evercore Inc., where she most recently served as treasurer and head of planning and strategy. She previously spent 16 years at Morgan Stanley, serving in roles including corporate treasury and CFO of their U.S. banks, as well as global head of financial planning and analysis.

Eric Steele was named CFO at Paytronix, a digital guest engagement platform for restaurants and convenience stores. Steele replaces acting CFO Lee Barnes, who will continue to serve as Paytronix chief data officer and take on additional responsibility as chief of staff. Steele joins Paytronix from Snap One, where he most recently served as SVP of finance and corporate development.

Jun Zou was named CFO at H World Group Limited (Nasdaq: HTHT) a hotel management company, effective Jan. 2. Zou succeeds Jihong He, who will step down as CFO and serve as the chief strategy officer of the company. Zou previously served as the executive vice president of the company. Zou has over 30 years of experience. Before joining H World, Zou worked as the CFO of Shenzhen Qiqitong Technology Co., Ltd. He previously served as the CFO of various companies, including Huawei Technologies Co, Ltd.’s global technology services business unit and Xunlei Limited.

Michael Mullican was named CFO at Groundworks, a foundation and water management solutions company. Mullican will initially oversee all finance, human resources, IT, legal, risk management, and manufacturing. Before joining Groundworks, Mullican served as president and CFO of Academy Sports + Outdoors, a full-line sports and outdoors retailer.

Paul Todgham has resigned from his position as SVP of finance and CFO at Cognex Corporation (Nasdaq: CGNX), a provider of machine vision for factory automation, effective March 15. Todgham will remain available to the company on a consulting basis after that time. Cognex is conducting a search process to identify a new CFO.

Allan Reine, CFO at Foghorn Therapeutics Inc. (Nasdaq: FHTX), a clinical-stage biotechnology company, will be departing Foghorn to pursue another opportunity, effective Jan. 16. The company has begun a formal search for a successor.

Big deal

2023 saw some of the biggest, hardest-fought labor disputes in recent decades, a new report by Pew Research Center, provides an analysis of the largest work stoppages in the U.S. since 1993. 

Going deeper

Here are a few Fortune weekend reads:

"Outgoing Morgan Stanley CEO James Gorman, who saved the company after the 2008 financial crisis, gives himself an A– for his 14-year tenure" by Paolo Confino

"What’s behind Apple’s $100 billion market-cap loss today? A major downgrade that has investors worried about slowing iPhone sales is the key culprit" by Will Daniel

"Robots are solving construction’s challenges, including a workforce shortage" by Stephanie Cain

"Getting good quality sleep as you age is key for a healthy brain. These 4 strategies can help" by Liz Seegert 

Overheard

“This work-from-anywhere policy and [real estate decisions] go together, and we decided to go deep on that policy. It’s been really significant.”

—Eric Severson, Neiman Marcus Group’s chief people and belonging officer, told Fortune in an interview discussing how the retailer drastically downsized its corporate office space in the Dallas–Fort Worth area, with no plans to recoup it anytime soon.

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