Tags: Siegel | dow | stocks | 15000

Wharton’s Jeremy Siegel: Dow Could Hit 15,000

Wednesday, 22 February 2012 08:09 AM

University of Pennsylvania economist Jeremy Siegel says the Dow Jones Industrial Average could hit 15,000 if the current rally entices investors back into the market.

"I think we have a stronger economy now than we did a year ago" except for oil, "which is a wild card," Siegel told CNBC.

"I think we can certainly move up from this position...I think we only need 8 percent a year further on this year and then next year to get to Dow 15,000, given valuations," said the economics professor at the University of Pennsylvania's Wharton School.

According to Siegel, 13,000 is double the level of the Dow at its low point of March 9, 2009, which he describes as "the deepest bear market since the 1930s.”

“I think that's somewhat of a milestone to double the low in less than three years," says Siegel, adding that stock valuations are very good "in a zero-interest-rate world.”

Despite an earnings season Siegel calls "good, not great," the stock market is strong.

"We don't need super-fast earnings growth to have a good market," he says.

"At today's valuations...if earnings stay the same this year and in 2013, 2014, you still have valuations and yields that make [the market] very, very attractive."

Siegel also notes that, as recently as 10 years ago, investors needed a lot of capital gains in stocks to match what they could get in bonds because interest rates were much higher than dividend yields.

"When dividend yields are higher than interest rates you don’t need so much in earnings growth to still have a great investment," he says.

Bloomberg reports that the Standard & Poor's 500 Index is approaching the cheapest level ever compared with bonds as Federal Reserve Chairman Ben Bernanke's zero-percent interest rates drive investors and companies from cash.

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Wednesday, 22 February 2012 08:09 AM
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