Jeremy Siegel remains positive on stocks and says corporate capital spending on artificial intelligence supports the market's upward tend.
Describing himself as constructive on equities, the WisdomTree and Wharton School economist said in his weekly commentary Monday that the labor market is cooling but not cracking and that money growth is subdued, which, combined with other factors, "is precisely the recipe for the Fed to continue easing."
With growth moderating and inflation receding in the housing pipeline, Siegel expects the Federal Reserve to trim another 25 basis points from its benchmark interest rate at the central bank's next meeting and to stay open to another quarter-point cut by year-end.
"Equities continue to look better than long bonds on a 6–12-month horizon. The market uptrend remains intact with AI capex proceeding apace," he wrote.
The Russell 2000 outperformed the Nasdaq in the third quarter, "an encouraging sign" that market breadth can improve when interest rate pressure eases, although large-cap value stocks continue to trail mega-cap growth, Siegel said. The “Magnificent 7” leadership persists, he said, noting that optimism over self-driving vehicles is lifting Tesla.
"The question for 2025 is whether the broader AI investment wave delivers company-level productivity to validate the spend. My base case is yes: tighter labor supply and tariff frictions will push firms to accelerate automation, keeping real unit labor costs contained and margins supported," Siegel wrote.
"Markets can handle slower growth if disinflation persists and AI-driven productivity shows up in 2026 and beyond. I remain constructive on equities while we are getting a tariff test for both consumers and how companies adapt this quarter," he said.
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