Economic guru Jeremy Siegel predicts that the seemingly endless bull run on Wall Street will finally take a short break next year.
"I don't predict a disaster next year, but a breather more than anything else," the finance professor at the University of Pennsylvania's Wharton School recently told CNBC.
"I think we've had quite a run. You know, we can't keep getting 200,000 jobs," added Siegel, referring to recent reports of jobs additions from the Department of Labor.
"We're at 4.1 [percent unemployment]; at this rate we go below 3.5 by the end of next year to 3. There's almost never been a time when that has not accelerated wages, which does mean a challenge for equities," he said.
The Wharton School professor also cited the Federal Reserve's plans to hike rates an estimated three times next year as the basis for his tempered market outlook.
"If you go with the three increases, that brings the yield on cash to 2 percent," Siegel told CNBC.
"People are going to get 2 percent on cash, it's going to be little bit more difficult for the stock market," he said.
He also warned savvy investors that political uncertainty and the midterm elections could also stall the market rally.
"It's very possible House or Senate or even both might turn Democratic, which would make any further Trump legislation impossible," he added. "Now that's one reason they're going for this corporate tax cut; honestly, I think that's built in. I think that's one of the big reasons we've had this big rise over the past six weeks."
Siegel isn't alone in his warnings that Wall Street's seemingly endless cocktail party may finally be over.
For example, Wall Street economists are telling investors to brace for the biggest tightening of monetary policy in more than a decade.
With the world economy heading into its strongest period since 2011, Citigroup Inc. and JPMorgan Chase & Co. predict average interest rates across advanced economies will climb to at least 1 percent next year in what would be the largest increase since 2006, Bloomberg reported.
As for the quantitative easing that marks its 10th anniversary in the U.S. next year, Bloomberg Economics predicts net asset purchases by the main central banks will fall to a monthly $18 billion at the end of 2018, from $126 billion in September, and turn negative during the first half of 2019.
That reflects an increasingly synchronized global expansion finally strong enough to spur inflation, albeit modestly. The test for policy makers, including incoming Federal Reserve Chair Jerome Powell, will be whether they can continue pulling back without derailing demand or rocking asset markets.
“2018 is the year when we have true tightening,” said Ebrahim Rahbari, director of global economics at Citigroup in New York. “We will continue on the current path where financial markets can deal quite well with monetary policy but perhaps later in the year, or in 2019, monetary policy will become one of the complicating factors.”
(Newsmax wire services the Associated Press, Bloomberg and Reuters contributed to this report).
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