Wharton professor Jeremy Siegel says investors’ hopes of a Fed pause are pushing stocks higher – and that skipping a rate hike would reduce the risk of a US recession

jeremy siegel

Jeremy Siegel, professor at Wharton.Steve Marcus/Reuters

  • Wharton professor Jeremy Siegel said hopes of a Fed pause were fueling the stock market rally.

  • Halting interest rate hikes now could reduce recession risks, the finance guru said.

  • Siegel also said U.S. stocks are unlikely to rise this year despite the momentum from the AI ​​hype.

Wharton professor Jeremy Siegel highlighted investors’ hopes that the Federal Reserve will end its cycle of interest rate hikes as a key driver of the recent strength in equities, and argued that a pause reduce the risk of a US recession.

The prospect of a Fed pause is a “major source of a rally today,” Siegel said in an interview with CNBC on Thursday.

“As you know, I warned that the Fed was going too far, the lagged effect of monetary policy, compounding for a slowdown in the second half,” he continued. “If they can take a break now, it reduces the likelihood of us having a recession.”

In a separate weekly commentary, Siegel said he was keeping tabs on labor and housing market data to determine the Fed’s next move. “The economy is seemingly running without a significant slowdown, but we shouldn’t assume the opposite – that everything is booming either,” he said.

When asked if stocks will skyrocket or slide, Siegel said he doesn’t think the former is on the charts, but noted the powerful boost that artificial intelligence has provided to stocks. technologies such as Microsoft and Nvidia in recent weeks.

US stocks have performed well this year, with the Nasdaq 100 and S&P 500 up around 33% and 10% respectively since early January. The astonishing rally in tech stocks partly reflects the explosive hype around AI after the successful debut of OpenAI’s ChatGPT tool.

“These sectors can catch fire, and that fire can continue all summer long,” Siegel said of the tech industry. He also reaffirmed his view that the AI ​​stock craze is not close to a bubble, while noting that valuations could possibly go too far.

Read the original article on Business Insider

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