Jeremy Siegel Projects Dow to Hit 18,000
Jeremy Siegel, Wharton University professor of finance, told CNBC viewers that in low interest rate periods like today PE ratios were typically 18-19; below what we see today. Given this, Siegel said the bull market wasn’t over and projected the Dow would reach its fair market value of 18,000 and the S&P 500 would achieve its fair market value of 2,000 in this bull run.
When asked by Brian Sullivan what could derail his forecast, Siegel indicated that a dramatic rise in interest rates would be problematic, but there is such demand for yield by an aging society entering retirement that he doesn’t see the yield on the 10-year Treasury going up much above 4%.
However, Siegel warned that labor market pressures, or “if gasoline went up to $4.50 or $5.00 then we would have to look again.”
Siegel concluded that his look at historical data show that investors can expect uneven stock market performance, but over long periods of time they will do well (6%) investing in the market.
Back in April 2013, the correctly bullish Siegel projected the Dow (then around 14,800) would end the year at 16,000 (actual close 16,577), while the S&P 500 would hit 1,700 (finished the year at 1,848) [link].