Tags: jeremy siegel | stocks | market | value

Jeremy Siegel: Stocks Are 'Really Good Long-term Value' Right Now

Jeremy Siegel (AP/Matt Rourke)

By    |   Thursday, 29 December 2016 08:46 AM

Jeremy Siegel, finance professor at the University of Pennsylvania's Wharton School, advises savvy investors that it is best to just jump into the market now and start buying stocks now instead of waiting for the market’s honeymoon with President-elect Donald Trump to lose its luster.

"I think stocks represent really good long-term value now," Siegel told CNBC.

"I see the earnings recession, I think, is over. We're seeing a meaningful acceleration. Interest rates, yes, are going up, but still very low. Stocks still have huge edges over bonds, and other investments, in my opinion," he said.

Siegel said that when investors anticipate a significant drop — for example, 10 percent which commonly defines a market “correction” — they typically don’ot consider the fact that the stock market may in fact rise between current levels and a large decline.

"First of all, it goes up 30 percent in the meantime, so even then they'd be better off" just sticking with their holdings instead of selling.

Investors also may discount the fear they'll feel once the hoped-for decline actually happens.

"Once it drops 20 percent, these guys are never going back in," Siegel said. "You know, 'Oh my god, look, the market's falling apart, I'm not going back in.'"

The Dow has been flirting with 20,000 but hasn't yet hit that milestone. For the year, the Dow is up 2,408.65 points, or 13.8 percent, the AP reports.

To be sure, some experts are predicting the Trump honeymoon with stocks will end relatively soon.

The year-end stocks rally was built on expectations of reduced regulations, big tax cuts and a large fiscal stimulus. Now signs are emerging from the Trump camp that harsher trade policies that could jeopardize the honeymoon are likely in the offing, and investors would be well advised to give those prospects more weight when gauging how much further an already pricey market has to run, Reuters reported.

By naming China hawk Peter Navarro as head of a newly formed White House National Trade Council, the incoming administration is signaling Trump's campaign promises to revisit trade deals and even impose a tax on all imports are very much alive.

Among the policies favored by Navarro and Trump's pick for commerce secretary, Wilbur Ross, who has the president-elect's ear on a range of economic issues, is a so-called border adjustment tax that is also included in House Speaker Paul Ryan's "Better Way" tax-reform blueprint.

If implemented, economists at Deutsche Bank estimate the tax could send inflation far above the Federal Reserve's 2 percent target and drive a 15 percent surge in the dollar.

Analysts calculate that, all else being equal, a 5 percent increase in the dollar translates into about a 3 percent negative earnings revision for the S&P 500 and a half-point drag on gross domestic product growth. The dollar index has already gained more than 5 percent since the U.S. election.

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Jeremy Siegel, finance professor at the University of Pennsylvania's Wharton School, advises savvy investors that it is best to just jump into the market now and start buying stocks now instead of waiting for the market's honeymoon with President-elect Donald Trump to end.
jeremy siegel, stocks, market, value
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2016-46-29
Thursday, 29 December 2016 08:46 AM
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