- Stocks could soar 15% or more this year as long as the Fed cuts rate quickly, Jeremy Siegel said.
- The top economist has warned of the dangers of keeping interest rates too high.
Stocks could jump 15% or higher – so long as the Fed cuts interest rates quickly later this year, according to Wharton Professor Jeremy Siegel.
"I would see a meaningful gain in the stock market, I think if I saw that the Fed would respond to the downside as rigorously as responded to the upside," the top economist said in an interview with $4 on Wednesday, referring to the central bank's aggressive interest rate hikes over the past year to combat inflation.
If Fed officials cut rates quickly in response to negative GDP or job market weakness, stocks could see smooth sailing and return 15% or more through 2023, Siegel predicted. If rates aren't cut in a timely matter, he believed stocks could see a 5%-10% return.
That comes after a difficult year for the market, with the $4 due to rising inflation and the Fed's rapid interest rate hikes.
For months now, Siegel has been urging the central bank to pause or dial back $4, as inflation is already on the downtrend.
Inflation has cooled from a 41-year-high of 9% last June to just $4 per the latest consumer price index report.
And Siegel has argued that $4 than what shows in the official statistics due to lags in the recorded data.
High interest rates also threaten to $4, he has said. $4 or more in event of a mild recession, JPMorgan has warned.
On Wednesday, Siegel said he believes central bankers would ultimately pull back on rates in order to avoid a recession and buoy employment, which is part of the Fed's dual mandate.
Though some experts have $4 later this year, markets are anticipating a retreat in interest rates, with investors pricing in $4 for a cut as soon as July.