‘You’ll See a Sell-Off’: Jeremy Siegel Warns Stocks Could Drop If This Happens, Says Kevin Warsh May Have

The market could be on the verge of a rate hike by the Federal Reserve, according to Jeremy Siegel, chief economist at WisdomTree.

In an interview with CNBC on Thursday, Siegel suggested that the market is signaling the necessity for a rate increase. He believes that the new Federal Reserve chair, Kevin Warsh, might be tested by the market and could potentially “bite the bullet” by raising rates, despite the possibility of political backlash.

Siegel also anticipates that if rates are not raised, it could lead to an unprecedented dissent within the Federal Reserve. He suggested that the forthcoming Consumer Price Index (CPI) data might offer some reassurance to the decision-makers.

Regarding the potential stock market reaction, Siegel predicts an initial sell-off, which could be followed by a recovery if the long bond market reacts positively. He believes that a rate hike could restore market confidence in the Federal Reserve’s commitment to combating inflation.

“I think the market will first shudder, and you’ll see a sell-off. And if, as I expect, that long bond reacts positively, saying, okay, the Fed is credible at fighting inflation, we’re going to get a recovery in the stock market,” Siegel said.