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

Jeremy Siegel makes the bull case for stocks
Jeremy Siegel makes the bull case for stocks

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.