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Wharton School of Business Finance Professor Jeremy Siegel on the outlook for the markets and whether more investors will get into stocks.
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Thank you were talking about it just now Ben -- -- S&P.
Hitting a five year high.
Last week.
Now he -- investors are concerned the market is overvalued.
-- for a correction my next guest says the future is bright the relatively continue into the new year Jerry Siegel Wharton school of business finance professor.
Joins me -- to talk about why he is bullish on equities and what's gonna drive growth.
And this new year and it seems that overall we start seeing a positive bias at -- Even the retail investor has decided.
That the bond market is that route they wanna be anymore going in equities but -- they feel safe through the rest of the year in equities.
Well I'm most definitely -- you know that I that we see a lot of articles.
About the public moving back into equity to truth of the matter is it's it it.
Hardly had begun just a little triple.
The public is still in bond funds the public is still in money market mutual funds I mean there there's three.
Trillion dollars in money market funds earning a big -- -- Zero and they're -- be fed up with that after awhile what they see any gains in stocks and we're gonna get headlines of new highs.
They're gonna say you know what it's time for me to get out -- zero.
Yielding money market so there is still a wave I think on the sidelines waiting to get into the market.
You know professor certainly second best week of I've been closed and equities fifteen million dollars but at the same time.
You know what we have seen in this has been history over the last three years as we have a good strong first half of the year.
And then whether it's Washington.
Or the economy was something kind of scares off -- equity traders.
When it -- we -- -- August and the second half of the year is when we lose those gains.
What -- 2013 any differing opinion.
But I got that analysts saying you know south Sallie -- -- go away we've had this bullishness in the first three.
For months that sense to have led deteriorated although less last year wasn't quite as bad.
You know I think a lot of that is just -- and -- we had the Euro crisis happening we had they.
You know the -- the Japanese tsunami earthquake -- just happen in March Capel and set a bad stage for comic.
I don't think that that's going to be part of the of our regular pattern in fact I think the second half of -- each year is gonna be better than.
The first half of this year we have to absorb the payroll tax -- They're they're probably gonna be you know some sort of sequestered yet that's going to -- slow it down.
But second half this year I can see three to 4% GDP growth and that carry into 2014.
How does that -- is very bullish indeed another bullish plush for the markets.
Over the last -- of course has been the Fed and the things that we've gotten from QE even the Europeans are now on board.
With boost from quantitative easing but -- -- and at some point do you worry about the Fed spoiling the party coming in and saying.
We're seeing inflation we're seeing -- risk and inflation.
We're gonna have to start discussing.
Discussing.
A lack of QE and potentially interest rate hikes and the next couple years what happens that.
Yeah yeah yeah you most certainly and you're right -- there I.
Actually do not believe the Fed will be able to hold to the summer of 2015.
The interest rates at the current level.
But you know people say I'm just scared about that for the stock market and I think that's going to be good news for the stock market.
They will only raise rates if the economy starts moving along quickly.
So that's going to be great for earnings and one thing you have to remember.
Bull markets do not hand when the Fed begins raising rates they -- -- anywhere from nine months to two years -- words.
And we're not even to the point where they're raising their rates so he even if they -- earlier.
Then they say right now -- I believe that be the case I certainly don't think that that's gonna be a threat to investors today.
You look so far as Jeremy at the -- -- companies that have reported the S&P 500 for the most part it's a pretty even split split of those could be on the earnings side beat on the revenue side but none of these numbers are fantastic.
By any means our -- are we to expect better.
Quarterly reports throughout the year from these companies who are still dealing -- with a lot of extra regulation and other issues.
Yeah.
And I think what these -- -- later this week we're gonna get GDP it's not gonna be a good number it's it's potentially going to be less than 1%.
So this is reporting on the fourth quarter and actually.
I think over 50% have been.
Beating their revenue estimates -- maybe just slightly so given how bad the fourth quarter actually -- I don't think these are our terrible earnings at all and I -- we -- experience that.
That acceleration throughout -- here like I believe so you're gonna see the revenue and the earnings beat yes them.
So earnings season so you know average is okay -- like that actually -- musical Wharton school of business finance professor such -- big -- in the markets thank you.
Thank you very much.
