Prof. Jeremy Siegel speaks at LINC 2018. (Photo: Lila Photo for TD Ameritrade Institutional)

Wharton Finance Professor Jeremy Siegel shared his long-term bullish outlook for equities with a crowd of about 3,000 RIAs and other guests Thursday during TD Ameritrade’s LINC 2018 conference in Orlando. But he also explained his near-term expectations.

“I do not see an inversion of the yield curve,” the so-called Wizard of Wharton explained.

What he does see for the year ahead is the Federal Reserve making three or four hikes in interest rates to about 2-2.25%.

“The Fed follows the data,” Siegel explained. “It will pause if there is a global crisis.”

He also sees the long bond rising to 3.25% by year-end. “That could be a bit of a challenge for the stock market,” the financial guru added.

“I believe the yield curve will get flatter but far from flat,” he explained, “and there’s no recession that I can see in the cards for the next 12 months.”

As for equity returns, Siegel expects more positive returns in the first half of 2018 and some type of a correction in the second half.

“Corporate tax cuts have excited the markets,” he said. “This is front-loaded, meaning that companies with expenses like capital equipment will not get depreciation later on.”

“The [stock] surge many not last through 2019 and 2020,” the professor added.

Rising rates are anticipated, he says, along with political uncertainty as the Democrats look to control more seats in Congress, which could impact legislation and President Donald Trump’s agenda.

“There’s more realism about future earnings and front-loading of tax cuts,” Siegel said.

“I see returns of 0 to 10% in stocks this year,” he explained, “so we could go up 15% and then down 10% at some point.” 

— Check out Jeremy Siegel: No Bubble, No Reason to Fear the Fed on ThinkAdvisor.