Are you ready for Dow 15,000?
Long-time market bull and Wharton School finance professor Jeremy Siegel told CNBC Tuesday the Dow Jones Industrial Average can exceed 13,000 and rise to 15,000 in a few years if more investors returnto buying stocks as the economy improves.
"I think we have a stronger economy now than we did a year ago" except for oil, "which is a wild card," he said. "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 15000, given valuations."
He spoke before the Dow briefly reached 13,000 midday Tuesday. The University of Pennsylvania professor said 13,000 is double the level of the Dow at its low point of March 9, 2009, "the deepest bear market since the 1930s. I think that's somewhat of a milestone to double the low in less than three years."
Stock valuations are very good "in a zero-interest-rate world. You don't get many opportunities like this," he added.
Despite an earnings season he called "good, not great," the stock market is strong.
"We don't need super-fast earnings growth to have a good market," he said. "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."
What’s also different today is that as recently as 10 years ago "you needed a lot of capital gains in stocks to match what you can get in bonds because interest rates were much higher than dividend yields," Siegel said. "When dividend yields are higher than interest rates you don’t need so much in earnings growth to still have a great investment."
Siegel admitted he hasn't always been bullish. He was "very bearish at top of the tech bubble" in March 2000.
"Have I been wrong? Yeah, certainly," he said. "One thing I regret is I did not see the financial crisis and the bear market. You know, I saw the housing bubble. I didn’t see the buildup of those risky assets leveraged in Bear Stearns, Lehman and all those others" whose failure helped bring on the 2008 financial crisis.
But then-Federal Reserve Chairman Alan Greenspan "didn’t see it either, and he could look at their balance sheets," Siegel joked.