Tags: market | stocks | Fed | taper

Professor Jeremy Siegel: Bull Market Has Room to Run

By    |   Wednesday, 20 November 2013 01:58 PM

Although some finance experts warn that the stock market is overpriced and heading to a crash, Wharton School of Business professor Jeremy Siegel definitely isn't one of them.

This bull market has room to run, Siegel told CNNMoney.

Editor's Note: Stocks to Drop 90%? These 5 Charts Reveal Why . . .

Siegel bases his assertion on corporate earnings, which were up 10 to 12 percent this year, and today's low interest rates. When interest rates are as low as they are today, price-to-earning ratios can be 18 to 19. Now they are only 15 to 16.

"I think this bull market has another 10 to 15 percent," he told CNNMoney. "Of course, there can always be a correction at any time. We know that. But I would not call this a bubble. I would not at all say the market is overvalued at this point."

Investors who are worried they might be too late to jump into the market need not worry, he says. "We have a lot of good dividend-paying stocks. With interest rates so low this is where conservative investors should want to be."

While the bond market is very risky since interest rates are going up, dividends are increasing 10 to 15 percent a year. That means the stock market is the place to be for long-term investors seeking both growth and protection from inflation.

Siegel said he doesn't understand those who maintain the market is in a bubble or is only increasing because of the Federal Reserve's quantitative easing stimulus.

Just look at earnings, he says. In 1999 and 2000, the PE ratios were twice today's. Now, we're at very modest levels, he says, stressing that earnings are supporting the rally.
A Fed tapering may produce "a few little ripples," but stocks will continue rising even after the Fed slows QE, he predicts.

Others believe easy-money policies of the Fed and other central banks that have flooded the world with liquidity are causing bubbles around the world.

"When it gets like this, just pick your asset: a painting, a bottle of wine, whatever. It's almost always a sign that there's too much money floating around," Howard Simons, a strategist at Bianco Research in Chicago, told Reuters.

Bubbles may now only be in far corners of the market, but that may not protect mainstream investors.

"What I learned in the last two bear markets is that it doesn't matter if you own the crappy asset," Simons said. "If someone else does and starts panic selling, it takes your good stuff down, too."

Editor's Note: Stocks to Drop 90%? These 5 Charts Reveal Why . . .

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Although some finance experts warn that the stock market is overpriced and heading to a crash, Wharton School of Business professor Jeremy Siegel definitely isn't one of them.
market,stocks,Fed,taper
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2013-58-20
Wednesday, 20 November 2013 01:58 PM
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