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Reasonable Men Disagreeing

07/22/2015

Some people pass through your life too quickly, and you wish for more time with them.

While doing some certification work at Wharton, I was able to hear Dr. Jeremy Siegel of Wharton five times . . . but only five times.  I respected him greatly, because he was an economic agnostic, which means he borrowed from whatever school of economics that made sense out of the numbers.  He was not an ideologue nor a “true believer.”  He was way too pragmatic for that.

Given my respect for him, it is uncomfortable for me to disagree with him.  He thinks the Fed will raise interest rates in September, while I think it will be December at the earliest.

Of course, it may be an “inside baseball” difference without a distinction, but it does impact the stock market.  It is not unlike waiting for the guillotine to fall.  The waiting is worse than the action!

As the September meeting date gets closer, I expect the market will weaken somewhat but bounce back nicely when the Fed declines to act.  The same pattern will be repeated in December.  (A gradual rise between both dates is the most likely scenario.)  More important than actually raising the rate will be the Fed minutes. The best scenario is that they raise rates by one-eighth of a percentage point, instead of one-quarter point, while reminding the market that the increase may be a solitary action and further increases will be “data-dependent.”  In that case, don’t get crushed by running with the bulls.

However, if I am right and Professor Siegel is wrong, I’m still young enough to attribute my correct prediction to “beginner’s luck” . . . that is true, right?

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