Stocks will struggle and a recession is on the table if the Fed fails to cut rates by September, Wharton professor Jeremy Siegel says

The job market is close to triggering one highly accurate recession indicator, according to Wharton finance professor Jeremy Siegel.Steve Marcus/Reuters

The rally in stocks could be endangered if the Fed doesn’t cut rates soon, Jeremy Siegel warned.

The Wharton professor made the case for the central bank to cut rates in September as data softens.

The US faces a higher risk of recession without cuts, he said, with GDP and job growth slowing.

The rally in stocks and the strength of the economy is at risk if the Fed doesn’t start cutting interest rates soon, according to Wharton professor Jeremy Siegel.

The top economist, who’s been making the case for the Fed to loosen monetary policy for months, pointed to more evidence of a weakening economy in an interview with CNBC on Thursday.

GDP has slowed from its rapid pace of expansion in 2023, with the Atlanta Fed estimating 1.5% growth in the second quarter. The job market, while resilient, is also beginning to stumble, with unemployment ticking up to 4.1% last month.

More job losses have pushed the economy closer to triggering a highly accurate recession indicator known as the Sahm Rule, Siegel noted. The indicator signals the start of a downturn once the three-month moving average of the unemployment rate rises 0.5 percentage points above its cycle low. The indicator ticked higher to 0.43 last month, according to Fed data.

That, combined with other recession warnings, is creating a more convincing case that the Fed should dial back interest rates, Siegel said, pointing to the inverted Treasury yield curve and the slowing money supply, two additional warnings that a downturn is on the horizon.

“We are in a slowing economy,” Siegel said. “I think it’s really time for Chairman Powell to really tee up in the July meeting a cut in September, and maybe another one in November. I think inflation is definitely under control, and I don’t want to see this slowing economy turn into something worse.”

Forecasters are still divided over whether the US could enter a recession over the next year, though higher-for-longer rates raise the…


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