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Tags: jeremy siegel | dow | 40 | 000 | stocks | wall street

Jeremy Siegel: Dow 40,000 Only a Few Years Away

By    |   Sunday, 12 January 2020 06:21 AM EST

Investment guru Jeremy Siegel predicts that Dow 40,000 is within reach sooner than you’d think.

The professor of finance at the University of Pennsylvania’s Wharton School of Business spoke just a few days before the Dow Jones Industrial Average on Friday crossed the 29,000 mark for the first time.

Siegel is forecasting that the Dow may hit 40,000 in the next four or five years, unless something derails the market’s bull run. “One could say we are four or five years away from Dow [40,000],” he speculated recently to MarketWatch.

Siegel, who forecast that the Dow industrials would see 20,000 at the end of 2015, recently told MarketWatch that market fundamentals are sufficient to support the recent run-up in U.S. equity benchmarks but worried that euphoria, or a meltup, could take stocks to unsustainable peaks.

“I think this market is fully valued and not undervalued, but I don’t think it’s overvalued,” Siegel said.

“Actually, one of the dangers is that people could be throwing risk to the wind and this thing could be a runaway. We sometimes call that a melt-up and produces prices too high and then if there’s a shock, you come down to Earth and that could impact sentiment,” he told Barron’s.

As for his longer-term view, Siegel said he’s looking at a more modest gain for stocks compared against last year’s powerful annual rally. “I’m looking for a zero to 10% increase in prices this year.”

Siegel apparently isn't alone in his optimism.

Wall Street’s most pessimistic equity strategist scrapped a call that U.S. stocks would fall in 2020 after a market surge late last year that almost nobody saw coming, Bloomberg reported.

Francois Trahan, head of U.S. equity strategy at UBS Group AG, raised his year-end target for the S&P 500 Index to 3,250 from a previous target of 3,000 set in November. His old forecast was tied with that of Morgan Stanley’s Mike Wilson as the lowest among those tracked by Bloomberg.

Trahan’s new call is hardly bullish -- the equity benchmark was down 0.1% to 3,270 as of 2:45 p.m. Friday in New York -- but he joins other strategists in turning more optimistic after the S&P 500’s 29% rally in 2019 exceeded almost everyone’s expectations.

With investors comforted by interest-rate cuts that the Federal Reserve carried out last year, Trahan argues that it takes time for lower borrowing costs to work though the economy and the benefits won’t take hold until 2021.

Stocks are likely to pull back in the first half as earnings expectations are at risk of falling, and then recover during the later half in anticipation of a pickup in growth, he says. “We see this year as having two distinct phases for equities as markets transition from pricing in slower growth to pricing in an economic recovery,” Trahan wrote in a note. “We expect a V-shaped year for the S&P 500.”

Meanwhile, according to Byron Wien’s annual list of surprises U.S. stocks will extend their record-setting rally in 2020 as subdued economic growth prompts the Federal Reserve 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, according to Bloomberg News.

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Investment guru Jeremy Siegel predicts that Dow 40,000 is within reach sooner than you’d think.
jeremy siegel, dow, 40, 000, stocks, wall street
Sunday, 12 January 2020 06:21 AM
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