As stocks rally, Siegel confident in Dow 18,000

Professor Jeremy Siegel of the Wharton School at the University of Pennsylvania has become renowned for his steadfast confidence in stocks.

For years he's insisted the S&P 500 and Dow Jones industrial average would continue to march higher, and largely, he's been right.


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Although he admitted during the October selloff he had moments of doubt, on Tuesday's "Closing Bell" Siegel said he's shrugged off skepticism and now believes markets may celebrate Dow 18,000 before it's time to put holiday decorations back in the attic.

"I believe the next six or seven weeks are going to take us beyond 18,000 on the Dow," Siegel said.

And he contended that stocks could hold their advance, even if rates begin to creep higher.

"I'm not afraid of a 2 percent increase in the fed funds rate," Siegel said. "When you look at the research, you'll find bull markets don't end when the Fed starts raising rates. They continue for nine months to 2½ years. It's at the final stages of rising rates when you have to be worried."

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Also, Siegel added he wasn't so sure rates would move significantly higher. Relative to historic averages, he said rates should remain low, in part, due to modest inflation.

"And with relatively low rates, stocks deserve a higher valuation," Siegel said, in part because dividend-yielding stocks become incrementally more attractive. In that environment, "Stocks can trade at 18, 19 or even 20 times earnings and they still would not be terribly expensive."

Given the earnings growth and expected improvements in the economy, he says there's every reason to expect further gains.

Of course Siegel doesn't anticipate stocks to rally indefinitely. "We're going to have a correction one day, for certain. But to wait for that to happen before you invest, that would be dangerous."

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