Tags: Wharton | Siegel | Dow | stocks

Wharton's Siegel: Even Chance of Dow 17,500 in 2013

Friday, 16 Mar 2012 03:37 PM

Wharton Professor Jeremy Siegel is sticking to his guns. After predicting that the Dow Jones Industrials had a 70 percent chance of rising to 15,000 this year, he doubled down in an interview and suggested an even chance we’ll see Dow 17,500 in 2013.

The Dow is up better than 8.4 percent year to date as of Friday midday, and up more than 14.1 percent on a 12-month basis.

Chalk it up to the hunt for yield, Siegel says. As the bond market peaks, investors flooding out of fixed income will naturally turn to stocks, he told Bloomberg TV.

“We know how much money has been flowing into those bonds funds over the last three or four years. All of a sudden they might get a little nervous and say ‘Where am I going to go? Where can I get some yield and also some protection against inflation and growth?’” Siegel said. “And that's when I think we're going to see people fleeing the bond market moving into stocks.”

Siegel has lots of reasons to back up his arguments, including what he considers cheap valuations. But the thundering herd that is Wall Street could be a major factor as well. A surprising Treasury selloff recently matters a lot, say money managers.

“Many asset managers who have sat this rally out are also now beginning to believe and with the end of the quarter only two weeks away — some may have to put money to work. . .as they do not get paid for sitting it out,” writes Kenneth Polcari, managing director at ICAP Corporates, in a recent commentary cited by The Wall Street Journal. “Next add in the move out of treasuries and that money has to go someplace also.”

Even if some believe the market is too hot, they might be emboldened to hang on in search of a better payday now, Polcari writes: “Why would sellers be in a rush to sell when there seems to be plenty of money aching to buy some stock?”

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2012-37-16
Friday, 16 Mar 2012 03:37 PM
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