Market may Correct before Year End: Wharton Professor

By Joyce Yu

The current stock market is a short-term buy to long time bull.  Jeremy Siegel, the Wharton finance professor, warns investors to keep an eye on growing risks stemming from trade tensions and the Fed’s policy which could dampen the market before year’s end.

“This market has had a great run, and I wouldn’t be surprised to see another correction,” Siege, who is best known for predicting Dow’s rise from 20,000 to 25,000, said Monday on CNBC’s “Trading Nation.”

Siege’s 2019 market forecast is soft either, predicting “A little bit of disappointment on 2019.” He said. “I’m not going to call it an end to the bull market. I’m going to just call it a potential sideways reaction to economic news.” Among all uncertainties faced, trade war remains one of the biggest downside risks to Siege. “We have some major challenges. The trade war is not yet resolved,” he said, adding that it puts pressure on the country’s gross domestic product.

On Tuesday, President Donald Trump vows to defend America’s “national interest” when feel cheated. He said at the United Nations General Assembly, “We will no longer tolerate such abuse. We will not allow our workers to be victimized, our companies to be cheated, and our wealth to be plundered and transferred.”

Trump’s comments came shortly after the US-China trade war further escalated when US imposed 10% tariffs on $200 billion in Chinese goods. Not only China, but also US allies were not able to be kept out of the firing line. Little progress has been made on trade talks between the US and EU; the U.S. and Canada have also struggled to reach an agreement on a framework to revise the North American Free Trade Agreement. More recently, the White House seems to ask one of its closest allies – Japan, to go back to the negotiation table in order to avoid tariffs on Japanese car exports to the US, a move that Japan will take seriously, according to analysts.

Seeing national security-based auto tariffs a blunt but effective tool to push countries into changing their trade deal terms with the US, the Trump administration is using a similar approach to put pressure on Tokyo. “[Mr Trump] made clear there are legitimate issues that need to be addressed with Japan in a number of areas and he is willing to take action on that when necessary,” the White House official said.

Shinzo Abe, who won re-election as leader of his Liberal Democratic Party last week and is here in New York attending the U.N. General Assembly, said he had a “very constructive” dinner meeting with President Trump on Sunday night, although initial negotiations between trade representatives from the two sides have not achieved any breakthroughs.

America’s deficit with Japan stood at $68.8 billion last year, ranked third behind China and Mexico. For the first eight months of this year, this amounted to $40 billion, according to official US statistics.


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