Wharton School and WisdomTree economist Jeremy Siegel said Monday he's more optimistic about the stock market than he was a month ago, citing its resilience as well as artificial intelligence momentum and geopolitical wins.
"While tariffs remain a headwind, the tax cut and a potential easing of tensions in the Middle East could propel equities closer to all-time highs. Investors should stay focused on the long term, balancing the tariff challenges with these emerging opportunities," he said in his weekly WisdomTree commentary, citing President Donald Trump's recent trip to the region and the potential for a durable peace with Iran.
Meanwhile, Siegel expects a 10% across-the-board tariff on U.S. trading partners, with a heftier 30% on China, alongside targeted tariffs on aluminum and steel. "The market seems to believe it can handle this 10/30 structure, assuming no escalation in retaliatory tariffs. If this assumption holds, we may avoid another downdraft," he wrote.
"However, I’m clear-eyed about the impact: these tariffs aren’t good for the market. Stocks would be higher without them, but the market’s current pricing suggests it can absorb the expected hit at current rates. Offsetting this negative are several tailwinds — oil prices are down, the dollar has weakened by 10% which boosts multi-national earnings, and AI-related spending continues to drive growth," the Wharton professor emeritus said.
He noted that Nvidia has regained ground and is closer to new highs, spurred by AI spending plans in the Middle East associated with Trump’s visit there.
Siegel also said he disagrees with Moody's move Friday to downgrade its rating on U.S. Treasurys.
"The government cannot technically default, as the Fed can always buy the bonds for any auction. The question is not whether a payment will be made, but what the dollar will be worth," he wrote. "Although the long-term projections of debt growth are unsustainable, I see a lot of debt capacity in the near term before this becomes a problem."
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