Wharton's Jeremy Siegel says the stock market is in the 'eighth inning before a correction'

Published Tue, Sep 14 20211:47 PM EDTUpdated Tue, Sep 14 20212:54 PM EDT

Kevin Stankiewicz @in/kevin-stankiewicz-b5593466 @kevin_stank

Wharton School's Jeremy Siegel told CNBC on Tuesday he expects stocks to experience a healthy pullback in the near future that ultimately allows the bull market to march on. The prominent finance professor has been using a baseball analogy in CNBC interviews since April to characterize where he believes the market rally stands. On April 8, he said Wall Street was in the "third inning of the boom" and then on May 7 said it was more like the sixth inning. "I think we're in the eighth inning before a correction. It is so hard to talk about the short run of the market. I don't predict that this bull market is over yet," Siegel said Tuesday on "Halftime Report." "We're getting close to where we're going to have to get some of the slop out and reset and look forward." Stocks have struggled so far in September, which is a historically tough month for the market. So far this year the deepest pullback for the S & P 500 has been approximately 4% , which is out of the ordinary and has led some market strategists and commentators such as Siegel to believe a more sizable drawdown is likely on the horizon. A correction is typically defined as the market declining 10% or more from its most recent high. Siegel suggested he's searching for, yet struggling to find, a major, bullish catalyst that allows the market to "surge ahead" this fall. "I do think if Covid peaks and we get that data coming in — and I do think the Fed is going to tee up the taper so that the rates are going to rise toward the end of the year — we will see a rotation," Siegel said, referring to the Federal Reserve starting the process of reducing its monthly asset purchases and yields in the bond market responding by going higher. The Fed is expected to begin that tapering at some point this fall. In response, Siegel predicted, "tech is going to take the breather and those cyclical stocks that have been hammered and those small-cap stocks that have been hammered could come back as a result." Siegel has for months contended inflation across the U.S. economy will be hotter and more persistent than Fed Chairman Jerome Powell and other central bankers have publicly stated. For that reason, he's worried the Fed may ultimately need to slam the brakes and ease off its highly accommodative monetary policy in a more dramatic fashion than most project. However, consumer prices in August post a smaller-than-expected increase , the Labor Department reported earlier Tuesday. While saying he personally believes the consumer price index is underestimating the extent of price pressures, Siegel said the report nevertheless gives credence to the Fed's belief that higher-than-normal inflation will be transitory. As a result, Siegel said the hypothetical "day of reckoning" — in which the Fed dramatically tightens policy after being confronted with new, problematic inflation data, causing problems for stocks — is "put off, certainly." "What we see is that the Fed doesn't have to panic," he added. Watch the full interview with Wharton School's Jeremy Siegel above.

Jeremy Siegel

Scott Mlyn | CNBC

Wharton School's Jeremy Siegel told CNBC on Tuesday he expects stocks to experience a healthy pullback in the near future that ultimately allows the bull market to march on.