Jeremy Siegel: Can AI Keep the Market Rally Going?

Added: 2026-05-31

[00:00:00]And always great to have a chance to speak with Jeremy Siegel, Wharton Emeritus Professor in Finance and also is Chief Economist at WisdomTree. Jeremy, great to have you back with us. Thanks for a couple of moments. Thank you very much, Dan. You know, it's interesting, since the last time we talked to you, we have seen the markets rise. The Dow has gone above 50,000. The conflict in Iran has continued and inflation is heating up. How do you view all that is going on at the moment? Yeah, it's a little confusing in many ways. I think there's two things. The biggest question is how can the stock market keep on rising to all-time highs, given what's going on with oil and everything out there? Well, I think, as we mentioned a month ago, thank goodness we are so much less dependent on oil than we used to be.

[00:00:52]Natural gas is our biggest source of electricity and energy, and that has not gone up in price.

[00:01:00]And we are exporters of oil. Yes, on the pump, we do have that problem, but it is not overwhelming. That having been said, you know, we take a look and we see, you know, Brent, well, now it's at 107. Yeah. It was 111 earlier. I think maybe, you know, there's rumors flying around, you know, deal, now deal. You know, the experts I talked to said if the straight remains closed, it'll just keep on kind of marching up. But no one really wants to kind of, I mean, you know, because anytime there's an announcement of some sort of deal, it would fall. So people are really, traders are afraid to push it up that much, given all the, you know, the volatility on the top. I was actually quite disappointed in the summit between President Xi and President Trump. I was hoping that Trump would extract some sort of a promise from, or not promise, but certainly attempt by China to intervene diplomatically with Iran. They have a lot of influence on Iran. I mean, all they did was, you know, said, we believe in open straits, and that had been said before. I didn't think the deals were particularly good. In fact, Boeing dropped on the day after they made a deal.

[00:02:31]It was a little disappointing in the numbers. And I thought the threats that she made on Taiwan were a little bit unsettling. So I didn't get it. I got a negative feel on the summit. And I think that Friday's drop that we saw was related to that. But it is interesting that when we've seen the gains over the last several weeks, really, they have been fueled by the AI stocks.

[00:03:04]Oh, there's no question. I mean, it was the chips. I mean, what happened was, I think the turning point, when Intel blew out the, you know, the top off its, you know, earnings, and actually said, we had marked down chips that we thought were worthless, and now are worth something.

[00:03:23]You know, a lot of people at the street worried that they were being, you know, that they were being under-depreciated. And my goodness, the chips that came back from the dead, that sparked the chip mania, which I think has gone a little bit too far. I think that's a kind of froth there. But it just shows a huge demand for AI. And yeah, and AI has fueled 80% of the gains that we've seen, you know, over the last four weeks in the market. So chips and the AI demand are still roost without question in this equity market. I mean, the other big thing going on is the bond rate. I mean, puncturing and hitting 460. It's going to be a real June 17th, the first meeting of, you know, that Kevin Warsh has. Wow. I would like to be in that room, but we'll hear about it. There's not going to be a drop in, I mean, unless something really gets settled completely with Iran and, you know, Albright dropped back to 70 or so. You know, there can be no drop. In fact, the big argument, will there be a bias now towards tightening and away from the easing bias that, of course, we had three dissents, as you know, a couple of weeks ago by the FOMC. Give us your thoughts on Kevin Warsh. And obviously he, as you just alluded to, he's stepping right into a lot at the beginning. But when you look at Kevin Warsh at taking over this role, what do you expect from him as a leader? Well, I think he's an excellent choice. I actually think he was the best of all, you know, the men that were bandied around by Trump. You know, he took a long time picking on and there were four or five candidates.

[00:05:27]And I thought he was the best he has. First of all, he's been on the Fed for a long time.

[00:05:31]He's very well regarded. He knows the institutional history and all the rest. It is really a big question of what he's going to do. I mean, you know, there's all this talk about he wants to maybe change the whole question with the dot plots. OK, that's fine. How many pressers are going to have afterwards? OK, that's fine. The balance sheet is a more complicated question.

[00:05:53]But all those are totally subsidiary to what is the Fed funds rate. That's the big kahuna here.

[00:06:01]That's what really matters. And of course, that's what Trump wants down. But none of the evidence that we're getting right now, because it's not just the oil price going up, the strength of the economy is still there. I mean, we're seeing no deterioration whatsoever in consumer spending, in the labor markets. Now, I'm not saying gangbusters, but no deterioration in whatsoever.

[00:06:30]GDP this quarter looks like it's quite high. Well, and if you want to talk about the labor market, you and I have talked in the past about just look at the weekly claims and those weekly claims keep right holding in that range of about. And I talked about that range, 200 to 240.

[00:06:47]We're hitting the bottom. We went below it to a 50 year low, and I think we're 210 now.

[00:06:51]So I mean, as long as stays in lower part of that, in fact, as long as it stays in the range, it's OK. Lower part of the range means there's no deterioration whatsoever.

[00:07:00]So then is what do you think are the chances that we would see a rate increase because of what's going on? I mean, that I don't think you're going to see a rainy, no change in June. Big argument is going to be on what's called the bias of the Fed. Are they more now likely to tighten or likely to loosen or stay the same? That's where the arguments are going to be. I don't expect anything change in June. But what June is going to do is set the tone for the July and future meetings. So that's going to be what's important to look at. Let me finish up by asking you kind of what your thoughts are on Chair Powell as he leaves kind of his legacy as he heads out. Well, not really heading out the door, staying as a Fed governor, but, you know, leaving the role of Fed chair.

[00:07:50]I think it's very mixed. Yes, he made a brave stand for independence. A lot of people applaud that. I think he failed miserably as I, you know, harp on 2000 to 2002 was among the worst Fed policy I've ever seen. The increase in the money supply was the greatest in 150 years.

[00:08:09]In a two year period, he handed all the money to Trump and Biden, especially the Biden expand fiscal stimulus from COVID was way excessive. And instead of standing against it, he didn't. So I really blame him for that. He landed on his feet afterwards.

[00:08:26]He's a very good, responsible person, didn't have monetary background, which I think contributed to his mistakes in his early years. And then, of course, it all became embroiled about, you know, should I stand against Trump, Trump trying to remove him and all that.

[00:08:41]And, you know, he's called a hero by those people that, you know, stood up to Trump. But the monetary policy was was mixed, bad at the beginning, much better at the end.

[00:08:55]Mixed legacy. And one word will always be attached to Chair Powell, and that's transitory.

[00:09:02]That word is going to stick with him forever. Yeah, I mean, you know, it was a terrible mistake.

[00:09:09]And when you saw the money supply increasing at those rates, I was on I was on the airways, you know, three weeks after four weeks after COVID looking at the data, I say, ain't no chance that this is transitory. This is going to make a permanent price change. And by the way, that price change, you know, you talk about, you know, how important it was. It really probably did in Biden on the presidency. I mean, so it was a very bad mistake that cost the Democrats a lot, you know, a lot. And and really the whole legacy of the Fed, they don't want to make that mistake again. Although, you know, his, you know, history suggests as time goes on, people forget mistakes that they had made earlier. Yes, they do. Jeremy, always great to talk with you. Thanks very much for your time. Thank you very much. You got it. Jeremy Siegel, Wharton Emeritus Professor in Finance and Chief Economist at WisdomTree.