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Professor Siegel on the state of the US Markets · UBS Trending

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  From the rise of deep sea to
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  the uncertain impact of tariffs.
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  2025 market
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  landscape
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  is challenging
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  historical patterns.
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  But here's
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  what's really intriguing.
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  Despite these disruptions,
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  my guest today
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  says he's finding
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  that stock returns could increase
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  if tech firms maintain
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  their trajectory.
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  Are we witnessing
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  a fundamental shift
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  in market dynamics
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  or just another chapter
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  in a familiar story?
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  We're going to break
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  that all down
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  for you and more right now
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  on UBS Trending.
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  Hi everyone, and welcome to UBS.
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  Trending I'm Anthony Pastore.
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  So nice to have you
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  join us today.
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  My guest in the studio with me
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  is Professor Jeremy Siegel.
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  He's a senior economist
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  at Wisdomtree and also professor
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  emeritus at the Wharton
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  School of Business at University
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  of Pennsylvania.
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  Professor Siegel, great
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  to have you in the studio.
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  First time
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  we're doing this together
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  in a long time.
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  Great to have you.
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  Happy to be here.
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  Be happy to have you.
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  You know something that I
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  we talk a lot
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  about where we are today.
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  And I think
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  in order to understand
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  where you are today,
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  you kind of have to look back
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  a little bit
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  at this historical context
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  of the markets.
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  When you look at let's start
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  with stocks versus
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  other asset classes.
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  How does today's market
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  compare to what you've seen
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  over your career
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  in the last couple of decades?
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  It's really
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  not all that different.
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  If you take a look
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  at the long term graph,
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  the long term
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  return on stocks
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  after inflation in six
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  and a half to 7%
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  per year,
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  I think it's going to be
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  a little lower
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  going into the future,
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  but not much.
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  It's swamps, bonds,
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  swamps, treasury bills,
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  swamps, gold.
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  It is the best
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  performing of all
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  the traded asset classes,
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  and I still think
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  it will be in the future.
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  Yeah, I love this chart.
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  It just lays it out.
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  I mean, it's from 1802, right?
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  All the way on the left.
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  I mean I'm I'm surprised there
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  data that even goes back
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  that far.
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  But you can see obviously
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  when you're looking at stocks,
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  I mean, what's the average return
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  on the S&P 510 8
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  to 10% every year. Yeah.
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  And that's
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  yeah that
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  that's including inflation.
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  Once you strip it out
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  it's you know 6 to 7.
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  And by the way, you know,
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  1792 I think it was
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  when the New York Stock
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  Exchange began.
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  So yeah.
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  We got to ten years
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  later than that,
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  but we now
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  have over 220 years of data
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  and the persistence of of stocks
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  and all those ups and downs.
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  I think is is a major message
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  of, of my book
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  stocks for a long run
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  and, and the data
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  that I've studied.
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  Yeah, yeah.
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  I mean,
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  you know, like,
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  obviously you've got
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  your many years in academia,
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  you're also,
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  you know,
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  obviously somebody who's,
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  a well-respected investor
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  and research analyst.
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  And I'm curious
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  to know
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  where you think about today.
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  We've got obviously, artificial
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  intelligence is one of the
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  biggest stories
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  that we've seen in a few years,
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  and specifically
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  a lot of conversation about Deep
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  Seek, which is this AI,
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  software came
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  out of China.
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  Valuations are anywhere between
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  1 billion to 10 billion.
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  It's anyone's guess.
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  But it has literally changed
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  the game
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  with their new R1 processor
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  to it's less energy,
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  it's easier to work.
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  What are your thoughts on
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  how these kinds of developments
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  will at least affect
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  the markets in one one way,
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  and also this historical trend
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  that we're seeing of
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  that upward value in stocks.
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  Well, it's a really good question
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  because in a way,
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  and others have pointed this out,
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  if we can make,
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  a cheaper,
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  this is going to help
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  all the user firms,
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  mom and pop,
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  if you want to say,
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  that are not tech firms and,
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  it could be a challenge
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  to those very high end
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  tech firms
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  that you don't get huge
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  margins off of there.
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  So it could be great for AI,
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  but it might even
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  be better for non
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  AI type stocks.
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  Looking forward
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  I yeah.
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  And one of the things I look at
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  when I'm looking at things
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  like AI is
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  you look at the individual stock,
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  the mag seven,
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  and there's various
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  degrees of weakness
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  that have happened
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  with few companies
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  over the last couple days.
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  But and I asked this question
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  of all the guests, is there room
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  to grow within that tech space?
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  When you look at the mag seven,
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  the big names.
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  Oh yeah, they're
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  they're they're definitely are.
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  I mean, there's,
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  there's a producer and the users.
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  Oh we have a graph of,
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  of, of the,
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  the growth stocks
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  versus the value stocks.
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  And it's truly
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  this is a long term
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  growth going back to 1979.
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  And you can see in the middle
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  there is internet bubble.
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  And people say,
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  oh my God, it looks worse now.
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  But the important thing
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  is that in contrast to
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  what happened in,
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  you know, 1999, 2000,
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  this big, surge
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  has been supported by earnings.
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  And,
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  and, and really honored,
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  over a big basis.
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  You know, I don't think that
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  there were at all overvalued.
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  That being said,
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  we have a close up
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  of of that graph.
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  And,
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  although you see the trend up,
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  you know, recently
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  there's narrative has shifted.
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  You mentioned deep Sea.
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  There's talk now
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  about, as you know,
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  self-driving of the Japanese
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  EV maker.
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  BYD there's a lot of talk
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  about the commoditization
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  of these AI, large
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  language models.
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  You're beginning
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  to see a shift saying,
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  you know what?
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  I don't want to put all my chips
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  in one basket, right?
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  I want to diversify out.
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  I made a lot of money on these.
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  I'm not saying
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  they're bad stocks,
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  but, you know,
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  my studies are nothing
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  stays on top forever.
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  And you got to be aware
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  that there's
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  a lot of other potential winners
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  that I think are going to mark
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  the future of, of our market.
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  Right.
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  You were
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  I read something
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  that you wrote saying
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  that the commoditization
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  of some of this,
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  I could be disastrous
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  to some of the chip makers
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  that are finding success today.
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  Yeah.
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  I mean, the commodities ization,
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  you know, of the high end,
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  is is
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  is the threat,
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  you know, people think
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  automatically if you use AI,
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  that's got to be good for those
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  AI makers.
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  But if you study markets,
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  it's the profit margin.
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  If something can be commoditized
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  and everyone does it,
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  this is good for everyone,
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  but it isn't necessarily good
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  for the sole maker
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  of of of those chips.
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  So that's why you're beginning
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  to see, a rotation here.
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  And I certainly wouldn't
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  be surprised to see
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  that continue in coming months.
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  Yeah.
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  It's,
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  so essentially it's a bad idea
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  to be a one trick pony
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  in this market,
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  especially on the tech side.
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  It's always, you know,
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  bad to be a one trick pony,
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  especially
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  for the long run.
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  Right?
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  You can be a winner
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  in the short run,
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  and then you stick too long
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  to a theme.
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  I've seen it again
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  and again in the market.
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  Yeah,
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  just to use
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  a little colloquial language
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  there for you
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  for a short to Siegel.
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  Thank you.
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  You know,
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  when we looking outside
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  the borders of the US,
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  you know,
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  we can talk about things
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  like tariffs, potential tariffs.
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  But for today,
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  I just want to kind of
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  think about
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  when you're looking
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  at the diplomatic tensions
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  and the volatile markets
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  from the US and across
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  to the other side of the globe
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  and international.
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  And em, do you see a change in
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  stock valuations
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  as you look across the globe?
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  Oh yeah.
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  I mean, you know, you take a look
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  at at Europe
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  recently
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  even you know with the dust up,
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  you know, between
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  Trump and Zelensky,
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  now maybe they have
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  to come forward on defense
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  and get their, their house
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  in order over here.
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  And we have a, we have a,
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  chart here of
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  price earnings ratios of,
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  of of all
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  the different,
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  country stock markets
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  in the world.
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  And the U.S
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  is the highest by far.
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  Now we are exceptional, right.
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  And we deserve the highest.
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  But, you know, when you have
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  14, 15, 16 price earnings
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  ratio areas around the world,
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  Europe has been one of them.
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  You don't need much growth
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  to get great returns
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  when you have that valuation.
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  When you have valuation
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  like mag seven in the 30s,
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  you got to meet
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  and beat your target
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  all the time.
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  Good thing about the rest
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  of the world,
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  which has a price earnings
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  ratio closer to 16, is
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  they don't need
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  that sort of growth to give you
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  those superior returns.
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  But do you you are
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  you're saying we need that here?
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  Well, well,
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  I think what I'm saying is that
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  that's important
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  for international
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  diversification.
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  And I realize that
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  everyone that's gone
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  foreign, very few of them say,
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  why should I do that anymore?
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  Because, you know,
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  we can't beat the S&P.
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  Let's put everything in the S&P.
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  Well, history shows you
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  there can be long periods.
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  One country outperforms,
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  but over the longer run
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  you know
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  the diversification will
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  pay, right?
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  I mean, certainly from our view
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  here in UBS and our chief
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  investment office, we still are
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  optimistic
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  on the outlook of the US economy.
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  So you agree with that too then?
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  Oh, yeah.
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  And the fed
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  the fed has quite a job.
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  I mean, do you I don't expect
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  or at least
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  we don't expect here at the CIO
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  that the fed is going
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  to start raising rates.
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  They might be less
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  dovish.
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  Maybe not.
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  I don't think
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  hawkish is the right word.
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  What what are your thoughts.
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  No I think really
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  raising rates
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  is not in the conversation.
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  I mean clearly
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  there is worry about the tariffs
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  right.
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  That we we that we have now and
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  and and the slowdown
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  in this first quarter
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  which we're going to get, you
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  know, more information as,
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  as, as time goes on on that.
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  So now really what's
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  come into the conversation again
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  is might be some drop in rates.
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  I don't think
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  it's going to be substantial.
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  And because I think there's a
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  lot of fundamental strength in,
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  in this economy.
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  So I don't think
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  we're going to have
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  a lot of rates.
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  I hope we don't, because actually
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  a lot of rate cuts
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  means we're going in a recession.
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  So you don't want that.
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  You know,
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  you really want a healthy economy
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  where the interest rate is,
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  is normal
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  and by the way,
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  normal interest rates means that
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  that long term interest
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  rate, ten year
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  bond, 30 year bond,
• 10:14
  or whatever is above
• 10:16
  the short term rate, right.
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  That's that's something
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  that, you know, just recently
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  with all the volatility,
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  we've actually
• 10:23
  dipped below on that
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  and hope to normalize that,
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  into the future. Right.
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  There was a little spike
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  in the VIX recently,
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  probably because
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  of the fear of tariffs.
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  But then you have
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  fed voting members.
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  Austan Goolsbee,
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  for example, said
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  that he believes inflation
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  is still on path to a 2% target.
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  So I love the way
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  you describe that.
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  It seems like the fed knows
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  what they have to do.
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  We think 50 basis points
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  here at UBS,
• 10:45
  probably likely.
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  It's very likely.
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  And I would like to see more
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  because I think that
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  that would mean to weaken
• 10:52
  right economy given the strength.
• 10:54
  I'd like to see them.
• 10:55
  But, you know, 50 basis points.
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  As long as that CPI is down
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  and you've got tariffs, remember
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  only on one time
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  click upward.
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  And it's not something
• 11:06
  you need to have a ten year bond.
• 11:07
  You're talking about ten years.
• 11:08
  So you know don't
• 11:10
  get too frightened by
• 11:12
  some pricing increases that
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  are a
• 11:16
  short run and not long run.
• 11:17
  Excellent.
• 11:17
  Professor Siegel,
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  one last question.
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  Where do you see
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  the best opportunities
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  in the market
• 11:21
  right now for investors
• 11:22
  out there
• 11:22
  who are looking at
• 11:23
  you and saying,
• 11:24
  I want to hear
• 11:24
  what he has to tell me.
• 11:26
  I think, don't put your all
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  your eggs in one basket,
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  one of the obvious things,
• 11:30
  and don't put all your it
• 11:31
  despite the tech
• 11:32
  and how good it is.
• 11:34
  I see
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  a time of rotation now.
• 11:38
  Diversification
• 11:39
  I think is going to be
• 11:41
  the name of the game in 2025.
• 11:43
  Couldn't agree more.
• 11:43
  Thank you very much,
• 11:44
  Professor Siegel.
• 11:45
  What a pleasure.
• 11:45
  Thanks for coming through.
• 11:46
  It's been a pleasure.
• 11:47
  Thank you.
• 11:48
  Good to see you.
• 11:49
  And thank you all for joining us.
• 11:50
  There's lots more information
• 11:51
  on our insights website
• 11:53
  ubs.com/views from comments
• 11:56
  from our chief
• 11:56
  investment office
• 11:57
  and great partners
• 11:58
  like Wisdomtree.
• 11:59
  So take a look at that website.
• 12:00
  Plus you can also take a look
• 12:02
  at all
• 12:02
  of our social media content.
• 12:04
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• 12:05
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• 12:06
  You can follow us at UBS
• 12:08
  trending on the Instagram channel
• 12:09
  for lots of studios content.
• 12:11
  And as always,
• 12:12
  if you have any questions
• 12:12
  about your portfolio or anything
• 12:14
  that Professor
• 12:15
  Siegel and I spoke about today,
• 12:16
  please make sure you are talking
• 12:18
  with your financial advisor.
• 12:19
  Until next time, I'm
• 12:20
  Anthony Pastore.
• 12:21
  Have a great rest of your day
• 12:22
  and remember to keep your eyes on
• 12:24
  what's trending.
• 12:25
  We'll see you soon. Everybody.