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Wharton professor Jeremy Siegel expects 2023 to be a promising year for equities as the Federal Reserve finally says that inflation is cooling.

He expects the stock market to skyrocket at least 15% and as much as 20% next year, which would send the S&P 500 back to 4,740 based on current levels.

"I think basically 90% of our inflation is gone," Siegel told CNBC in an interview on Monday, explaining that on-the-ground inflation, especially in the housing market, is slummping at a considerable rate despite lagging indicators relied on by the Fed showing the exact opposite.

"My point has been housing has declined but the way the government computes it is so lagged that it will continue to show increases. And I think finally the Fed will say, 'you know what, on the ground things are all declining and we got to think about that,'" he said. 

Siegel expects the Fed to soon pivot away from its aggressive rate hiking path.

"They need to pause to see what actually is going to happen. That would really spark a big rally. But even a strong statement that we have seen good signs about inflation and that most of our [rate] increases are behind us I think could spark a December rally. If not then, it will come in January," he added.

In regards to a recent note from Goldman Sachs that said the stock market will likely end flat in 2023, Siegel said, "I think they're being way too pessimistic... I think the market is undervalued."

"It's taken way too long for the Fed to get it and they haven't gotten it yet that inflation is basically over, but they will, and I think they're going to get it maybe very late this year or early next year. And I think as soon as they get it you're going to see a big increase in equity prices," he said.