The famed finance professor discussed his predictions for the Dow, would not be surprised to see it over 18,000
Juky 3, 2014 – By Emily Zulz, ThinkAdvisor
Wharton professor Jeremy Siegel predicts the Dow Jones Industrial Average could go up to 21,000 by year-end, he said on Wednesday during an interview on CNBC’s “Halftime Report.”
“I would not be surprised to see it over 18,000,” the renowned finance professor told CNBC. “I think the big difference between what I see now and what I saw last year is the interest-rate situation.”
Siegel credits low interest rates as the catalyst to send stocks soaring.
“The so-called new neutral, as PIMCO calls it, as Bill Gross calls it, really does, as he admits himself, argue for higher valuations in the market,” Siegel said. “We shouldn’t just think 15, 16 — the old historical [P/E ratio] normals — are normal anymore. Because if the interest rate is really going to be lower, and I do believe that, we are looking at 18 and 19. And at that level we could be well above 18,000 by the end of the year.”
The Dow broke 17,000 for the first time on Thursday, and Siegel’s expectations are that it will continue to climb.
“I think we’re going to get to 18 and above. Could it go to 19, 20? It could,” he said. “I’m not going to say that’s the likely event, but so many people have missed this bull market that they start saying, ‘Hey, you know, this is my last chance.'”
But Siegel did add that the next 6-12 months could see “a lot of volatility in the market” and a limit for stock prices.
“We could be overvalued at 20-21,000, at least in the short run,” he told CNBC. “Just like I said a year ago, markets often go beyond fair-market value before they correct back down.”