2023-06-04 12:08:31
Siegel: Stopping interest rates now can reduce the chances of a recession
Renowned economist and Wharton professor Jeremy Siegel has cited investors’ hopes that the Fed will pause its rate-raising cycle as a key driver of the recent strength in equities, and argued that a pause would reduce the risk of a US recession.
In an interview with CNBC, Siegel said that the possibility of the Federal Reserve stopping is “a major source of the recent hikes,” according to what was seen by Al Arabiya.net.
He continued, “I warned before that the Fed will go too far in its tightening policy, as well as the lagging effect of monetary policy, which is accumulating due to the downturn in the second half.” “If they can stop now, it reduces the likelihood of a recession.”
In a separate comment, Siegel said he is watching the labor and housing market data to determine the Fed’s next move. “It seems that the economy is moving without any noticeable slowdown, but we should not assume the opposite – that everything is also booming,” he added.
When asked if the stocks will go up or down, Siegel said he doesn’t think the former is on paper, but he did point to the strong push artificial intelligence has provided to technology stocks such as Microsoft and Nvidia in recent weeks.
US stocks have performed well this year, with the Nasdaq 100 and S&P up around 33% and 10% respectively since the beginning of January. The astonishing rise in technology stocks partly reflects the explosive hype around AI following the groundbreaking debut of the open AI tool ChatGPT.
“These sectors can catch fire, and that fire can continue through the summer,” Siegel said of the tech industry. He also reiterated his view that the craze over AI stocks is nowhere near a bubble right now, while noting that valuations may eventually go for more than they’re worth.
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