Wharton professor Jeremy Siegel says investors’ hopes of a Fed pause are pushing equities higher – and ignoring rate hikes would reduce the risk of a US recession

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

• The financial expert said stopping rate hikes now could reduce the likelihood of a recession.

• Siegel also said that US stocks are unlikely to rise sharply this year despite the impetus from the AI ​​hype.

Wharton professor Jeremy Siegel pointed to investors’ hopes that the Federal Reserve would halt the rate hike cycle as a key driver of recent strength in equities, and argued that the pause reduce the risk of a recession in the US.

Siegel said the possibility of a Fed pause was “the main source of a rally today”. CNBC interview on Thursday.

“As you know, I warned about the Fed going too far, the lagging impact of monetary policy, accumulating for a recession in the second half of the year,” he continued. “If they can pause now, this will reduce the likelihood that we will have a recession.”

In a seperate weekly comment, Siegel said he is monitoring labor and housing market data to determine the Fed’s next move. “On the surface, the economy is operating normally without any significant slowdown, but we shouldn’t assume the opposite – that things are also booming,” he said.

When asked if the stock will rise or fall, Siegel said he doesn’t think it’s possible, but noted the strong boost artificial intelligence has given tech stocks like Microsoft. and Nvidia in recent weeks.

US stocks have performed well this year, with the Nasdaq 100 and S&P 500 up about 33% and 10% respectively since early January. The amazing rally in tech stocks partly reflects the exploding hype surrounding AI following the blockbuster launch of OpenAI’s ChatGPT tool.

“Those sectors can catch fire, and that fire can continue throughout the summer,” Siegel said of the tech industry. I also Reaffirm your point of view that the craze for AI stocks isn’t near a bubble, while noting that valuations could eventually overshoot.

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