Wharton School finance professor Jeremy Siegel advises savvy investors that the current bull market could actually surge as much as 10 percent higher if the U.S. were to settle its trade war with China and reach a new North American Free Trade Agreement.
"The next few months are going to be a challenge," Siegel told CNBC.
"But if we can get China [and] NAFTA settled, I see a 10 percent pop in the market because I think that's the kind of 800-pound gorilla keeping a lid on prices now," Siegel told CNBC’s "Squawk Box."
Meanwhile, the United States and China escalated their acrimonious trade war on Thursday, implementing punitive 25 percent tariffs on $16 billion worth of each other’s goods, even as mid-level officials from both sides resumed talks in Washington.
The world’s two largest economies have now slapped tit-for-tat tariffs on a combined $100 billion of products since early July, with more in the pipeline, adding to risks to global economic growth, Reuters explained.
China’s Commerce Ministry said Washington was “remaining obstinate” by implementing the latest tariffs, which kicked in on both sides as scheduled at 12:01 p.m. in Beijing (12:01 a.m. EDT/0401 GMT). The tariffs, scheduled weeks ago, did not interfere with the start of a second day of trade talks in Washington led by Chinese Commerce Vice Minister Wang Shouwen and David Malpass, the U.S. Treasury under secretary for international affairs.
Elsewhere, the head of Mexico’s biggest business chamber expects key advances in Nafta talks with the U.S. in the next few days, Bloomberg reported.
Juan Pablo Castanon, president of the CCE group that comprises some of Mexico’s most influential industry associations, said progress by the two countries should be enough to allow Canada to rejoin the talks soon. He spoke in a brief interview on Wednesday night after arriving in Washington to help the country’s negotiators. Along with him came Bosco de la Vega, head of Mexico’s agriculture chamber CNA, and Juan Gallardo, chairman of beverage maker Cultiba.
“We’re expecting good news,” Castanon said when asked if a breakthrough in negotiations between the U.S. and Mexico is imminent. “We’re expecting significant advances and for Canada to be able to return to the table.”
The S&P 500's bull market turned 3,453 days old on Wednesday, making it the longest such streak in history, according to some investors' definition, Reuters reported.
Wall Street is widely considered to be in a bull market that started on March 9, 2009, when investors grappled with the global financial crisis that had vaporized over half of the U.S. stock market’s value. Since then, the index has more than quadrupled.
Now after nine years and five months, investors are debating when, not if, the current run-up in stock prices will end.
For his part, Siegel also warned of some possible landmines for investors, including trade uncertainty, a Federal Reserve that "looks still pretty aggressive" and the midterm elections.
"Oddsmakers are saying that maybe Democrats are going to take the House," Siegel observed.
But even with such political upheaval, Siegel didn't see a reason for investors to panic.
"The most important plus of the Trump adminstration was that corporate tax reform," Siegel said. "That really was a good 10 [or] 12 percent of the earnings growth. Two-thirds of earnings growth this year was due to that."
Material from Bloomberg and Reuters were used in this report.
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