When you picked up your copy of Barron’s this weekend you were probably shocked to see the cover story “DOW 15,000.”
That bold call comes from Wharton finance professor Jeremy Siegel who examined 141 years of stock performance data concluding the market is due for an upswing.
Siegel, the author of Stocks For the Long Run, foresees the Dow going to 15,000 and possibly even 17,000 within the next two years.
What’s more is he doesn’t think those numbers are outlandish.
“Well, believe it or not, we’re not that far off…I think we’re about 16% below, which means we only do have to do about 8% a year for the remainder of this year,” Siegel said this afternoon in an interview with Trish Regan on Bloomberg Television.
“So I think it’s actually very modest gains. I think — I would not be shocked if we were there by the end of this year,” he added.
The fundamental indicator that he’s been looking at is valuation of earnings.
“By far I think the most persuasive bullish factor is valuation of earnings. Not only are now at a 12 or 13 or 14 — depending how you look at it — P/E ratio, which is below the long-run average, but I think even more importantly in an extraordinarily low interest rate environment and it does matter what your alternatives are when you invest. And yes, I’ve seen stocks cheaper than this, but I’ve never seen stocks cheaper than this relative to bonds and I think that’s a real positive factor for the market.”
Watch the video clip below.