Siegel: Stocks may jump 15% in the 2nd half of 2016 — here’s why

Well-known Wharton professor of finance Jeremy Siegel says that a rebound in earnings amid low interest rates could add up to a huge rally for the stock market.

"If we get a good second half of the year earnings-wise, then I think the market could be up 10 to 15 percent, " Siegel predicted in a Friday interview on CNBC's "Trading Nation."

Siegel says that widespread investor perceptions that the market is richly valued are largely due to weak earnings that were engendered in part by the massive decline in oil prices. With energy earnings set to rise nicely and the global macroeconomic environment stabilizing, he says earnings may be ready to rise by 10 to 12 percent.

If that materializes, then "given the low interest rates, the market does not look expensive" — particularly with "all the central banks acting very, very dovish."

After all, with the 10-year Treasury yield plumbing historic lows, "there's really no hope for yield in the fixed income market," which should drive investors to stocks, Siegel said.

Still, he grants that "we need an earnings rebound to really get the stock market going."

The first hints as to whether that will materialize come in a few weeks, when companies will begin to release their second-quarter earnings.

To be sure, not everyone is so excited about what they will announce. Bank of America Merrill Lynch strategist Savita Subramanian, for one, contends that the true pain of the U.K.'s decision to leave the European Union will be learned as many companies release Brexit-dampened guidance. This could cause investors a nasty hangover after last week's substantial post-Brexit bounce.


Trades to Watch

Trader Bios


Trading Nation is a multimedia financial news program that shows investors and traders how to use the news of the day to their advantage. This is where experts from across the financial world – including macro strategists, technical analysts, stock-pickers, and traders who specialize in options, currencies, and fixed income – come together to find the best ways to capitalize on recent developments in the market. Trading Nation: Where headlines become opportunities.

Michael Santoli

Michael Santoli joined CNBC in October 2015 as a Senior Markets Commentator, based at the network's Global Headquarters in Englewood Cliffs, N.J.  Santoli brings his extensive markets expertise to CNBC's Business Day programming, with a regular appearance on CNBC's “Closing Bell (M-F, 3PM-5PM ET).   In addition, he contributes to CNBCand CNBC PRO, writing regular articles and creating original digital videos.

Previously, Santoli was a Senior Columnist at Yahoo Finance, where he wrote analysis and commentary on the stock market, corporate news and the economy. He also appeared on Yahoo Finance video programs, where he offered insights on the most important business stories of the day, and was a regular contributor to CNBC and other networks.

Follow Michael Santoli on Twitter @michaelsantoli

Read more