University of Pennsylvania's Jeremy Siegel: Bull Market for Stocks 'Still Intact'

Friday, 22 Aug 2014 11:17 AM

By Dan Weil

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Some stock market participants may be jittery about geopolitical turmoil and the possibility of a Federal Reserve rate hike sooner than expected.

But Jeremy Siegel, a finance professor at University of Pennsylvania, is sticking to his bullish guns. Since January he has forecast that the Dow Jones Industrial Average will hit 18,000 by year-end, and now he says it may even be 19,000.

The Dow stood at 17,000 by late Friday morning.

Editor’s Note: Retire 10 Years Earlier With These 4 Stocks

Low interest rates and inflation will combine with strong earnings to boost stocks, he told CNBC. The 10-year Treasury yielded 2.42 percent Friday morning, and consumer prices rose 2 percent in the 12 months through July.

The market now trades at 16.5 times 2014 earnings, Siegel said. A move to 18,000 would imply a price-earnings ratio of 17.5, "a very reasonable multiple given the interest rates," he said.

As for potential pitfalls for stocks, "we live in a world of uncertainty, and bull markets climb the wall of worry," Siegel said. "When we see nothing in the future that can worry us at all, I'll get worried, and I'll probably tell people to sell stocks."

But for now, "I think our bull market is still intact," he said.

Other market participants agree. "A lot of the geopolitical concerns with the Middle East, Russia and Ukraine have dissipated," Phil Orlando, chief equity strategist at Federated Investors," told Reuters.

"The combination of that with good economic data and strong corporate results is making investors move stocks higher."

Editor’s Note: Retire 10 Years Earlier With These 4 Stocks

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