Following the Federal Reserve‘s recent rate cut, Wharton finance professor Jeremy Siegel says the odds of another cut in December are now a "50/50 toss-up." However, he still expects the S&P 500 to reach the 7,000 mark by year’s end.
Powell Puts A Lid On December Rate Cut Overenthusiasm
In a recent interview, the senior economist at Wisdom Tree argued that Fed Chair Jerome Powell's post-meeting comments—in which he stated a December cut was “not a guarantee” and “far from it”—were a deliberate maneuver to manage investor assumptions.
"Chair Powell, more than any other chair that I can recall… is very sensitive about preparing markets for whatever the Fed is doing," Siegel said. He noted that market odds for a cut had climbed to “70, 80, 90%.”
Powell's goal, Siegel believes, was to "correct that" and push those odds back toward 50/50. "Particularly if he believes the markets are heading in one direction, that is not a sure thing… he’s going to correct that."
The core of the issue, according to Siegel, is that the Fed genuinely doesn’t know what its next move will be. "The truth of it is, they don’t know what they’re going to do until they see what’s going to happen the next six weeks," he said.
Next 6 Weeks ‘Very Important’
Those “very, very important” six weeks leading up to the Dec. 10 meeting will provide crucial data on the health of the U.S. consumer.
Siegel said the Fed will be watching holiday retail sales closely for any “sticker shock” related to tariffs, which could cause consumers to pull back.
Siegel emphasized the Fed’s data-dependent stance, assuring that stockholders “have the Fed at their back.” He concluded that if consumer spending slows, a rate cut is definite, with a 50-basis-point cut being possible if data is “very poor.”
However, if the holiday shopping season remains strong, "I think you will have a pause."
Siegel Sees S&P 500 At 7,000
Despite the Fed's new, more cautious stance, Siegel believes the bull market has been “dented, but not a fatal blow.” He stated that “blockbuster” earnings and strong company guidance are still supporting the market.
While Powell’s comments have muted enthusiasm, Siegel said he “can still see gains over the next two months” and “wouldn’t be surprised if we take out 7,000 on the S&P.”
He did caution, however, that rising bond rates, which he expects to climb, will create “a little bit more challenge” for stock returns.
S&P 500’s last 52-week high stood at 6,920.34 points; however, it ended 1.17% lower at 6,771.55 on Tuesday. While the Dow Jones and Nasdaq 100 also closed lower on Tuesday, the futures were mixed on Wednesday.
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Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
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