Jeremy Siegel: Big Tech Stocks' Reign Could End in January

News December 17, 2024 at 03:50 PM

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As tech mega-stock valuations continue to climb, investors should remain vigilant and consider rebalancing opportunities early next year, economist Jeremy Siegel suggested Monday.

"The continued dominance of the Magnificent Seven in the equity markets has been striking, underscoring a lack of rotation into value or small-cap stocks despite fleeting moments of activity in those sectors," he wrote in his weekly column on WisdomTree's website.

The Nasdaq surge past 20,000 last week appeared to stem from fund managers seeking to align with benchmarks ahead of year-end reporting, Siegel said.

"While this tech-led rally persists, a recalibration and rotation is possible in January to reflect more balanced market leadership," he wrote.

Market resilience reflects ongoing optimism about artificial intelligence-driven growth and deregulation, the Wharton School economist wrote.

"However, the tangible economic benefits of AI adoption remain distant, leaving the bullish sector narrative intact for now. A rotation into neglected areas of the market, such as value or small-cap stocks, could materialize in 2025 if regulatory reforms and easing financial conditions create a more favorable backdrop for these non-tech segments," Siegel said.

The emeritus finance professor expects the Federal Reserve to make a "hawkish" 25-basis-point cut when it announces its new benchmark interest rate Wednesday. Policymakers may indicate that they prefer only two cuts next year, "and this might jar risk assets," he said.

Siegel noted that the economy shows no signs of weakening, despite a recent slight uptick in unemployment.

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