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Jeremy Siegel

Portfolio > Economy & Markets > Stocks

Jeremy Siegel: Stocks Can Thrive Even With Fewer Rate Cuts

By Dinah Wisenberg Brin

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The U.S. stock market doesn’t need copious Federal Reserve interest-rate cuts to enjoy a strong 2024, Wharton School and WisdomTree economist Jeremy Siegel suggested Monday.

“I do not think we need five to six cuts from the Fed to have continued equity market gains this year,” he wrote in his weekly commentary posted on WisdomTree’s website.

The dot plot, the chart indicating Fed members’ projections on policy moves, “penciled in three rate cuts,” but the key insight Siegel took from Fed chair Jerome Powell’s discussion in December “was the willingness by the Fed to cut rates if the economy weakens,” the emeritus finance professor said.

Siegel, senior economist to WisdomTree, previously was concerned the Fed might be stubborn in its inflation fight even if the economy softened but has been encouraged that the central bank is considering the employment side of its mandate as much as the inflationary side, he noted.

“If the economy is strong and the Fed does not cut rates as much as some expect — earnings growth may end up being supportive for the market,” he wrote.

Big tech stocks, which drove big market gains last year, maintain their appeal, he suggested.

Higher duration growth stocks — those with higher valuation price-to-earnings multiples based on future cash flows — “have held up very well in the face of these higher interest rates relative to the value stocks. This is not usually the case, but I am attributing this strength to the continued strong performance in the semiconductor companies, which are spreading excitement over the impact from artificial intelligence, AI, technology,” Siegel said.

“For the full year, I still expect greater participation in the rally from a broader cross section of the market, but sentiment still favors the high-quality, big-tech stocks,” he wrote.

Siegel noted the S&P 500 reached an all-time high Friday as the economy showed ongoing strength. A key weekly jobless claims indicator fell under 200,000, the lowest level in nearly 60 years, he said, adding, “That is clearly indicative of strength in the economy.”

(Photo: Lila Photo for TD Ameritrade Institutional)

Dinah Wisenberg Brin

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