Tags: Siegel | Dow | stocks | fifteen | thousand

Wharton’s Siegel: Dow Will Hit 15,000 This Year

Thursday, 26 Apr 2012 07:46 AM

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The Dow Jones Industrial Average will hit 15,000 this year, up from around 13,000 today, as from a historical standpoint, stocks are underpriced despite recent gains, says Wharton School economics professor Jeremy Siegel.

Siegel has made such a prediction in the past and stands by it even amid increasing uncertainty in Europe, China and in the U.S., where tax cuts are set to expire and spending cuts are set to kick at the end of this year.

"Take a look at earnings," Siegel tells CNBC. "Earnings are up 10 percent year-over-year. Expectations were all down to 2 percent."

Editor's Note: Study: Bernanke Intentionally Devalued the Dollar

Company earnings "are such a persuasive story on valuation for the market. Honestly, if you ask me what’s keeping the market down, I’m increasingly believing what [Federal Reserve Chairman Ben] Bernanke called…the fiscal cliff that’s coming at year end, with $500 billion worth of taxes and spending hits. I think that’s really keeping a lid on the market."

The Bush tax cuts are set to expire at the end of this year, right around the time automatic spending cuts are set to kick in, a combination dubbed a fiscal cliff that will suck hundreds of billions of dollars out of the economy and offset the country's tepid growth.

Bernanke himself has used uncharacteristically concise words to describe the fiscal cliff, urging lawmakers and the White House to act now as monetary policy can't help the country with this crisis.

"The size of the fiscal cliff is such that there's, I think, absolutely no chance that the Federal Reserve could or would have the ability whatsoever to offset that effect on the economy," Bernanke told reporters at a press conference, the AFP newswire reports.

Editor's Note: Study: Bernanke Intentionally Devalued the Dollar

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