Siege on Stocks: Warsh to Raise Rates, Trigger Sell-Off

Jeremy Siegel, Wharton professor and economist, warns that new Fed Chair Kevin Warsh will be forced to raise interest rates at next week's FOMC meeting. This decision would not only impact stocks but also trigger a potential sell-off.

Siegel points out that the bond market is demanding action, with the 10-year Treasury yield reaching its highest reading in a year at 4.83% on September 9, 2026. He argues that this rate increase has run out of room and that Warsh will have to 'bite the bullet' and raise rates.

Siegel's call for higher interest rates is driven by two key indicators: pump prices and the bond market. Gasoline futures are signaling a potential rise in gasoline, which would negatively impact consumer sentiment, while the 10-year Treasury yield has reached its highest reading in a year.

According to Siegel, stocks will first 'shudder' and experience a sell-off due to the rate hike, but if the bond market treats the hike as credible in fighting inflation, they may rally. However, he expects range-bound trading in the weeks that follow.