Tags: Jeremy Siegel | Federal Reserve | Rate | Hike

Jeremy Siegel: September Fed Hike Will Make 4Q 'Very Best Quarter for Stocks'

By    |   Tuesday, 02 Jun 2015 11:03 AM

Stock-market guru Jeremy Siegel, professor of finance at the University of Pennsylvania, predicts that if the Federal Reserve finally hikes interest rates in September, the fourth quarter will be “the very best quarter for stocks."

Most policymakers at the U.S. central bank, including Fed Chairman Janet Yellen, expect to begin raising interest rates this year. The Fed has kept rates near zero since December 2008. However, economic experts debate on just when the central bank will pull the trigger and hike rates.

The Fed has said it will raise rates only once it sees further improvement in the labor market, and is reasonably confident that inflation is headed back to the Fed's 2-percent target.

But he said the central bank’s shouldn’t act right away. “I would not say just now. In fact, I think if they go in June, which I think is a very low probability event, that won't be good,” he told CNBC.

"If they go in September, I think the fourth quarter might be the very best quarter for stocks this entire year," the Wharton School finance professor said.

Investors are now generally being advised to hold off on buying stocks until after the Fed raises rates. And once the central bank moves, investors most likely will jump into the market.

"When they raise a quarter percent and see the world does not end, they'll say, 'You know what? This wasn't so bad after all,'" he said. "So I think the anticipation of the raising rates is worse than the actual act of raising rates," he said.

“I don't think they should go early. I don't think there is any reason for them to do it now. But I'm saying when they do it later this year, which I'm pretty sure they will, we could have a very, very good fourth quarter.”

“Even when the Fed raises and even if we look through 2016 and 2017, we're going to have low interest rates for many years, if not a decade or longer,” he said.

“I see interest rates being relatively low compared to what we were used to for the next 10 years.”

But not all experts see the central bank hiking rates this year as the dollar’s strength complicates the Fed’s rate-hike strategy, The Wall Street Journal reports.

While the dollar’s value is down a bit from its March peak, the Fed’s own models show the greenback’s drag on the economy is likely to grow in coming months, the Journal reported.

This and other factors could prompt some Fed officials to lower their latest growth forecasts, to be released at the next Fed policy meeting June 16-17--and to wait even longer to move on rates, the Journal reported.

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Stock-market guru Jeremy Siegel, professor of finance at the University of Pennsylvania, predicts that if the Federal Reserve finally hikes interest rates in September, the fourth quarter will be "the very best quarter for stocks."
Jeremy Siegel, Federal Reserve, Rate, Hike
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2015-03-02
Tuesday, 02 Jun 2015 11:03 AM
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