Wharton School professor Jeremy Siegel fears that the seemingly endless bull-run stock market is about to come to a sudden cataclysmic end.
“I’m just a little that this is becoming a momentum-driven market at this point,” Siegel said on CNBC.
“I’m a little bit worried that if it continues much longer that something will puncture it and people will get off the train,” he said.
“You don’t know how far it will go. Certainly no sign of a break right now, but I think we people jumping on the train here and are going to ride it on a narrow path until they feel they’ve got some good gains,” he said.
“Boy, when you get off that train it falls quickly,” he said.
CNBC quoted Siegel as saying the market’s rally is taking place in a generally favorable environment that includes low interest rates, appropriate liquidity from the Federal Reserve’s repo operations and the improved standing of President Donald Trump.
That does not mean the market is not vulnerable, though, Siegel said.
“I’m a little bit worried that if it continues much longer that something will puncture it and people will get off the train,” he said.
Siegel said he doesn’t think long-term investors need to significantly adjust their strategies, “but I don’t see this sort of run continuing certainly throughout 2020 and maybe not even through the quarter.”
However, fellow economic guru Byron Wien is a bit more optimistic.
According to Wien’s annual list of surprises, U.S. stocks will extend their record-setting rally in 2020 as subdued economic growth prompts the Fed to cut interest rates.
The S&P 500 will climb above 3,500 at some point this year, Wien, vice chairman of Blackstone Group Inc.’s private wealth solutions business, wrote in a statement along with Chief Investment Strategist Joe Zidle. Economic growth will trail forecasts and the Fed will lower its benchmark rate to 1%, they predict, Bloomberg reported.
The S&P 500 opened lower by 0.88 points, or 0.03%, at 3,282.27 on Wednesday, Reuters reported.
“The economy disappoints the consensus forecast, but a recession is avoided,” they wrote. “S&P 500 multiples remain elevated because monetary policy is easy and investors become more comfortable that intermediate interest rates will rise slowly.”
Wien, 86, a former Morgan Stanley strategist who’s put out his “surprises” list since 1986, is one of the most widely followed on Wall Street. A year ago, he predicted the S&P 500 would climb 15%, with the economy continuing to expand and the Federal Reserve refraining from raising interest rates. The benchmark index rallied 29% and the central bank cut rates three times.
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