Author and Wharton professor Jeremy Siegel has taken a lot of heat for his bullish predictions over the past couple years. But he’s largely been on the money — and now he says the bull has more room to run.
Siegel tells CNBC that he thinks the Dow Jones Industrial Average will be in the 16,000 to 17,000 range by year-end, and he thinks 18,000 is “definitely achievable” in 2014. “The market is totally spooked by whether [quantitative easing] continues or not,” Siegel said, but he doesn’t think it should be. The Federal Reserve “would never accelerate tapering unless the economy was so much stronger, which has got to be good for earnings,” he says. “So in one way, you can’t lose on stocks — either the economy’s weak, the tapering will end; or the economy’s strong, they’ll taper, and earnings will be strong. That’s why I think stocks are still a win-win situation.”
Siegel also says valuations remain reasonable. “Equities’ valuation right now is just about at its historical average, but one has to realize that that’s the average of when interest rates were as high as 15 and 20 percent, and as low as they are today,” he said. “When you’re in a low or moderate interest rate environment, price-to-earnings ratios of 18 and 19 are actually more typical — and we’re not there yet.”