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Siegel called the market rally — here's what he sees happening next

One well-known market bull believes that stocks are set to keep climbing, but is looking for a key catalyst to drive further market growth.

Jeremy Siegel, professor at the University of Pennsylvania's Wharton School, appeared on CNBC's "Trading Nation" in July to predict that equities could jump by as much as 15 percent in the second half of the year. In an appearance Tuesday on CNBC's "Futures Now" he reinforced his outlook, though this time with the caveat that a strong earnings season is needed or the market could see its wings clipped.

"I think we need an earnings acceleration If we really want to get this market moving," said Siegel. "But in the presence of a 1.5 percent 10-year [Treasury note yield], low rates, the Fed [giving] at most one increase [this year] and the dividend yield on the stock market being over 2 percent, people are saying, 'Hey, it's not bad being here.'"

While investors have been thrilled with the continual highs set by today's markets, there has also been a touch of caution even in spite of the good news. Three consecutive quarters of lower productivity growth, weak GDP expansion around the world and record low inflation have caused even a market bull like Siegel to temper their predictions for a market rally.

But with a steady earnings season, things could change. Big tech stocks like Apple and Facebook have led the charge in second-quarter earnings, while financials have recovered somewhat with many of the big banks beating estimates. Biotech companies have also performed relatively well, with giants like Amgen and Biogen crushing estimates, sending their stocks soaring in the aftermath.

The successes have been offset, however, by other sectors that have seen disappointing results. While a handful of retail's big names, like Michael Kors and Ralph Lauren, have managed to beat earnings estimates, investors are still urged to approach them with caution given the industry's struggles this year. Energy earnings have also disappointed this quarter, with big names like Exxon Mobil missing estimates by large margins.

Siegel still sees the S&P 500 headed above 2,300 this year, which means that the index would have to rise about another 6 percent based on Wednesday's level of 2,177.34. But Siegel is also looking at possible rallies in the Nasdaq and the Dow to take the markets higher.

More specifically, Siegel believes that if a catalyst like earnings appears to drive growth, the Dow could beat its intraday record of 18,622.01, which the index set in late July.

"We'll get over 19,000, that isn't much from now [and] it could reach near 20,000 if we get a meaningful acceleration in GDP and earnings growth, [along with] getting oil back towards $50 to $55," said Siegel. "That would revive the energy sector, which has been a big drain on earnings."

But at the same time, the current economic environment could also mean that all three indexes fall short of reaching their full potential, especially if the rest of this season's earnings reports don't pick up.

"I don't think there's going to be that much deviation between the S&P, the Dow and the Nasdaq, [with] the Nasdaq [being] more tech heavy, [and] the tech sector has been doing well," he added. "That's really where the only real growth tends to be, but I think all of them are going to be up less than 10 percent this year unless we get a meaningful acceleration in the second half of the year."


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