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Dow to 18,000!? Very Likely, Says Jeremy Siegel

Tuesday, 9 Apr 2013 | 3:29 PM ET
Siegel: Why Dow 18,000 Could Happen
Tuesday, 9 Apr 2013 | 1:03 PM ET
Penn Professor Jeremy Siegel on the market's next move, earnings and why the Dow could go as high as 18,000 next year, with CNBC's Mandy Drury and the Futures Now Traders.

The stock market has been on a tear lately, with the Dow Jones Industrial Average hitting another all-time high of 14,706.52 on Tuesday, but the bullish Jeremy Siegel argued that the Dow could see 18,000 by the end of next year.

(Read More: Dow Touches New High)

To Siegel, professor of finance at the University of Pennsylvania 's Wharton School and author of "Stocks for the Long Run," there are two reasons the market could keep pushing up.

To start, Siegel noted that stocks are trading at historically cheap multiples. Equities are so inexpensive that no asset class is more attractive, he said. Take Treasury bonds. With the yield on bonds so low, he thinks you can easily pay 18 to 20 times earnings and not be overpriced on stocks.

(Read More: CNBC Explains Treasury Bond Prices and Yields)

"Given what I see going on in the rest of the world and all this liquidity coming in, people are going to look to stocks as that hedge with earnings power and dividends, which none of those other asset classes have," Siegel said on CNBC's "Futures Now."

He added that stocks will likely stay strong as long as the Federal Reserve maintains its policies on bond purchases and record-low interest rates. In September, the Fed launched a third round of quantitative easing, in which it has bought $40 billion of mortgage-backed securities per month, primarily in mortgage-backed bonds.

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(Read More: CNBC Explains the Federal Reserve)

"That's good for stocks," Siegel said of QE. "There's no sign that's stopping, so this rally has legs."

In turn, he thinks the Dow could rally to 16,000 by the end of this year but skyrocket to 18,000 by the end of 2014.

It does seem as though Siegel has a knack for reading the market. In November 2012, he called for a 1,000 point rally in the Dow. Since then, the Dow has rallied nearly 2,000 points.

Read on for 10 Things You Need to Know to Trade Futures

— By CNBC's Drew Sandholm

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