Jeremy Siegel, the WisdomTree advisor and Wharton professor, remains positive about U.S. stocks in 2014, even though he thinks “we’ll probably have” a 10% correction “sometime this year.”
When that correction hits, he thinks it “would actually be a very good entry point” for buying stocks, and that “anyone with an intermediate- to longer-term orientation will be a winner coming in at these levels,” which he considers “below what I consider long-term, fair-market valuation.”
Speaking with Morgan Stanley Wealth Management’s CIO, Mike Wilson, Siegel said stocks remained undervalued. “I think we’re around 10% to 15% under fair market value,” he said in an interview published in Morgan Stanley’s February 2014 Market Outlook.
Moreover, Siegel took Wall Street to task for what he thinks was its misplaced focus on quantitative easing as the main driver of the bull market. “I think the biggest miss on Wall Street is that the stock market rally is due to quantitative easing,” he said in the interview, and while he admits that the Fed’s liquidity actions are “not a negative factor… this market can be fully justified on the basis of valuations.”
As for emerging markets, Siegel believes they are still undervalued, citing their lower-than-long-run average P/Es. “In the three-to-five- year term,” he said, “I believe investors will be rewarded by investments there.”
Turning his gaze back home, Siegel remains bullish on the U.S. economy as well, suggesting GDP growth of 3.5% to 4% is likely in 2014, helped by the lack of the “fiscal drag” that the economy faced in 2013, which included the 2% payroll tax increase, new high marginal tax rates on high-income earners and the sequester. Without those drags, he said “maybe we can get the private sector moving.”