Workers are losing to inflation, says Wharton's Jeremy Siegel

Summary

Jeremy Siegel argues that workers are losing ground to inflation as wage growth lags CPI, and recent productivity has been disappointing. He sees the stock market doing well despite this, driven by incredible profit margins in technology and hyperscale AI spending. He hopes AI-driven productivity gains will spread to the broader economy this quarter.

• Real wages are falling: July wage growth at 3.2% while CPI expected at 3.4%, meaning workers' purchasing power is declining.
• Productivity growth over the last three quarters has been below the 15-year average, disappointing after an earlier boost from AI.
• Since GPT's launch in late 2022, average productivity growth was 2.5%, better than the long-term trend, but recent data shows a pullback.
• The S&P 500 is near record highs, supported by strong profit margins in technology and ongoing hyperscale AI spending.
• Technology represents 40% of the S&P 500 and its margins are still expanding, giving Siegel confidence the market can continue rising.
• He sees early signs that Q3 could bring productivity improvements and AI benefits spreading to average companies.
• Geopolitical risks around Iran could disrupt oil prices, but if oil stays low, inflation pressures will ease.
• Overall, Siegel is cautious on the real economy but optimistic on the stock market's near-term direction.