An interest rate increase by the Federal Reserve could create a stock market rally, Jeremy Siegel predicts.
“I think we could have a stock market rally even though so many people are really fearing doom and gloom with the rate increase,” the professor of finance at the Wharton School told CNBC on Tuesday.
With the Fed’s highly anticipated decisions mere days away, Siegel seemed pretty confident of a rate hike.
The Fed’s two-day September meeting begins Wednesday, and the policy statement on rates and economic projections will be released at 2 p.m. Thursday. A rate increase would be the first in almost 10 years.
“They should move on Thursday, and I think they’re going to” Siegel told CNBC. “It’s going to be a close call. It’s going to be exciting at 2 o’clock.”
Siegel said it’s important to remember that the announcement will be a statement about the “intentions of further increases or not.”
“Remember Janet Yellen used the term ‘we can be patient’ and then she later described that as at least two meetings,” Siegel said. “She could say we are raising rates and ‘we can be patient’ in raising them again as we assess the economic and market impact of those rates.”
Siegel said that “even more importantly” the statement includes a new dot plot.