Jeremy Siegel, senior economist at WisdomTree and professor emeritus of finance at the Wharton School, said the Federal Reserve will likely skip a rate hike in September if oil holds near $80 a barrel.

Siegel spoke as the S&P 500 topped 7,800 for the first time, extending a rally that earnings and cooling inflation data have driven this month.

Cooling Inflation Data Backs the Case

Siegel said this week’s inflation reports lowered the odds of a hike. The Consumer Price Index (CPI) report landed Wednesday, and the Producer Price Index (PPI) report followed on Thursday.

He said Goldman Sachs cut its forecast for the Personal Consumption Expenditures (PCE) price index, the Fed’s preferred inflation gauge, after seeing the data. Siegel said the bank now expects the gauge to rise just 0.2% for the month.

Siegel tied part of that decline to the stock market’s own gains. He said rising equity values flow into a portfolio management subcomponent inside the PCE index, pushing it lower.

That reading builds on a trend traders spotted after Wednesday’s cooling CPI report. Traders had gone into that report split roughly evenly on a September hike, and the softer print tilted sentiment toward a hold.

Siegel also pointed to a leverage-driven liquidity scare from earlier this month. He said it exposed limited excess risk in the market rather than a deeper problem, and stocks have since rebounded to new highs.

Earnings Momentum and a Rotation Into Value

Siegel said artificial intelligence spending is lifting earnings well beyond the hyperscalers that build AI infrastructure. He said companies across sectors are using the technology to cut costs and widen margins.

“I do not think it’s inappropriately bullish at this point.”

Jeremy Siegel, CNBC

He also flagged a rotation out of expensive growth stocks and into cheaper value names trading around 15 times earnings. Siegel said many of those companies have not yet captured AI-driven efficiency gains, leaving room to catch up.

That shift echoes warnings from other market watchers about an uneven AI stocks shakeout that could hit smaller players first.

Traders will now watch whether rate-hike odds for September keep falling as retail sales data and the full PCE report arrive later this month.

Source: BeInCrypto