Investment guru Jeremy Siegel sees “no huge bull push” because the stock market isn’t cheap anymore.
The Wharton finance professor also told CNBC that he sees risks that could undermine the 2019 market rally, such as the U.S.-China trade war and slower-than-expected earnings growth.
“I’m not predicting a big rally,” Siegel told CNBC. “We’ve got a slight tilt upward, but no huge bull push,” he said.
The “market is counting on a China deal; if not, expect a big sell-off,” he said.
“We’ve got an 80 to 90 percent probability of a favorable outcome really baked in,” Siegel said. “One of the strongest things [President Donald] Trump has going for him is the economy, and the stock market. And, going into an election year, he doesn’t want that to falter.”
To be sure, a three-day surge in U.S. stocks stalled on Tuesday, as a downbeat forecast from drugstore chain Walgreens Boots hit the pharma sector and economic data did little to ease growth concerns.
The Dow Jones Industrial Average was dragged down by a 12.2% slump in Walgreens Boots Alliance Inc after the company cut its 2019 profit growth forecast and reported a quarterly profit that missed analysts’ estimates, Reuters reported.
“We’ve gotten to a place and time where we are going to need new evidence to move this market higher,” said Art Hogan, chief market strategist at National Securities in New York.
Despite coming under pressure, the S&P 500 is 2.4% away from a record closing high hit in late September, held back by trade uncertainties, the Federal Reserve’s plans to end monetary policy tightening, Britain’s chaotic exit from the European Union and concerns about corporate profit growth.
With the first-quarter corporate earnings reporting season about two weeks away, investors are bracing for what may be the first U.S. profit decline since 2016. Analysts expect quarterly earnings to fall 2%, according to Refinitiv data.
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