Jeremy Siegel: Equity markets will react positively to a rate cut next week

Summary

Jeremy Siegel discusses the Fed's likely next move and market implications. He expects the Fed under Kevin Warsh to raise rates despite political pressure, causing an initial equity selloff before a recovery if long-term bonds rally on restored Fed credibility. He also sees near-term equity caution and rising energy prices as headwinds.

• Siegel expects the Fed to hike rates next week, with another hike possible in October.
• He says 10-year Treasury yields moving toward 5% and futures are signaling the Fed should raise.
• An initial stock market selloff on a hike could be followed by recovery if the long bond rallies.
• Long-term bonds may rally because the Fed would look credible on inflation.
• Near-term equities are seen range-bound due to September seasonality and fuel costs.
• Oil, diesel, and gasoline futures are rising, with gasoline signaling further price increases.