Photo: Bloomberg TV
Stock markets have been extremely volatile this past week with concerns about Europe, China and domestic gas prices. But Wharton Professor and perma-bull Jeremy Siegel who said there’s a 70 per cent chance that the DOW could reach 15,000 by the end of 2013, and a 50 per cent chance that it could reach 17,500 is sticking to his guns.
In an interview with Bloomberg TV he said despite all these risks he thinks current valuations are “persuasive” and warned that the biggest risk at the moment are the looming tax increases:
“You actually didn’t mention what I think is the biggest threat for this year, and that is those looming tax increases. The fiscal cliff that Bernanke referred to coming on January 1 involving added taxes and cuts in spending.
Now my prediction, which came when it came out in Barron’s 2 – 3 months ago, was for not the end of 2012 but the end of 2013. I think we’re going to get some resolution in the new Congress that’s really going to send prices up. I still think they’re going to go up from here this year but unless we get some extension so that we don’t fall off that fiscal cliff on January 1 I think that’s going to put a cap on the gains that we will have in 2012. But once we get some resolution on their I see the market going 10 – 15 per cent higher right away.”
Siegel expects Congress to make a six or eight month extension on tax cuts as President Obama is unlikely to face an election in a bear market.
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