Tags: jeremy siegel | market | struggle | investors | stocks

Wharton's Jeremy Siegel: 'This Market Is Going to Struggle'


By    |   Tuesday, 17 April 2018 05:08 PM

Investment guru Jeremy Siegel is warning that the return to a raging-bull stock market might not last for much longer.

The Wharton finance professor warns that anemic earnings returns compared with last year could just be enough to stop the charging bull dead in its tracks.

"It's going to be a flat to slightly upward tilting year as good earnings collide with what I think will be higher interest rates both by the Fed and in the Treasury market," he recently told CNBC.

"This market is going to struggle this year."

His best-case scenario is a stock-market gain of no more than 10 percent. Last year, the Dow surged 25 percent, CNBC.com explained.

"These gains that people are talking about — 10 to 15 percent a year this year and maybe next year, I just don't think they're going to be realized," Siegel said.

He also doesn’t believe the landmark Trump tax cuts will be enough fuel to power a market rally until year’s end.

"Firms are actually going to lose depreciation deductions in future years. So, it's going to be great in 2018," he said. "2019 — you're going to have to have a growing economy to generate earnings gains. It's not going to be anywhere near as easy as it was this year," he said.

"I'm not predicting a bear market. Valuations are still very attractive for long-term investors. We're selling around 18 times this year's earnings," Siegel said. "I wouldn't sell out there."

Tuesday on Wall Street, U.S. stock indexes rallied on broad-based gains while Netflix and UnitedHealth earnings impressed investors and boosted optimism about the U.S. corporate reporting season, Reuters reported.

Analysts expect S&P 500 company profits to rise 18.6 percent in the first quarter, the biggest increase in seven years, according to Thomson Reuters data. Strategists said strong earnings expectations as well as economic data from earlier in the day boosted equities.

“The overall picture is a positive one when it comes to earnings across sectors. There’s a nice little turbo boost being given by the tax reform legislation,” said Kristina Hooper, chief global market strategist at Invesco, in New York.

“Investors seem to be ignoring that which is not positive,” Hooper said after White House Economic Adviser Larry Kudlow said the United States was not convinced of the merits of joining the TPP. The market had gained the previous week when it appeared that U.S. President Donald Trump was keen on TPP.

“It’s easier for markets to focus on that which is positive and tangible rather than try to assess the potential outcome of protectionism,” she said.

For his part, Trump took to Twitter to tout the economy.

"So many people are seeing the benefits of the Tax Cut Bill. Everyone is talking, really nice to see!" Trump said in a recent tweet.

(Newsmax wire services contributed to this report).

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Investment guru Jeremy Siegel is warning that the return to a raging-bull stock market might not last for much longer.
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Tuesday, 17 April 2018 05:08 PM
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