Stocks may slump if banking fears choke growth - and the Fed should end its inflation fight, Wharton professor Jeremy Siegel says
into pulling back and raising their standards to protect themselves against a sudden wave of withdrawals, Siegel said. Consumers and businesses might find it harder to borrow as a result, curbing economic growth and increasing the risk of a recession.
In a bid to tame inflation, the US central bank has hiked rates from virtually zero to upwards of 4.75% over the past 13 months or so. Higher rates can cool price growth by encouraging saving over spending and making borrowing more costly. Yet they can also temper demand, drag down asset prices, and push the economy into a recession.
"Friday's data basically indicates the economy is not falling apart yet, with yet being the keyword," he said. However, he noted the full impact of the banking chaos is yet to show up in most economic data. Meanwhile, the author of"Stocks for the Long Run" cautioned the stock market may be nearing a peak if investors follow the famous investing adage and"sell in May and go away."
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