- The stock market could rally another 8%-10% this year, according to Wharton professor Jeremy Siegel.
- The top economist pointed to a strong economy, which could fuel strong corporate earnings growth.
Stocks could still have another 10% to run this year – and the bull market in stocks could last regardless of what the Fed does with rates, according to Jeremy Siegel.
The top economist reiterated his optimism for the market, despite the stellar returns in 2023 and disappointing earnings from some big tech firms, like Tesla and Intel so far this earnings season. Of the S&P 500 companies that have reported earnings so far, 69% have beat estimates, according to FactSet, lower than in previous years.
But stocks still could rally as much as 10% in 2024, Siegel predicted during an interview with CNBC.
That's because stocks are still fairly valued, even if they're not exactly cheap. Even with some growth names trading at a multiple of 20 times earnings, there's still room to run, Siegel said.
Fair valuations will be further boosted by a strong US economy. Real GDP grew 3.3% year-per-over last quarter, according to the Commerce Department, reflecting persistent growth despite tighter financial conditions in the economy.
All that points to rising odds that the US will avoid a recession this year, with hopes for a soft landing growing "stronger and stronger" with every passing day, Siegel added.
"I still think we can get 8%-10% for the year. I think the economy is still very strong. I think we're actually going to beat $242 earnings on the S&P 500, and as a result, I think stocks could advance," the Wharton finance professor said.
The S&P 500 officially entered a bull market last year, after when the benchmark index rose over 20% from its October 2022 low. The benchmark index notched a new all-time-high at the end of last week, capping off a string of record closings so far in January.
Those gains have largely been fueled by growing hope for Fed rate cuts this year, which are expected to loosen financial conditions and boost asset prices. Investors pricing in around 6 rate cuts to come by the end of 2024, according to the CME FedWatch tool– about double the amount central bankers have officially forecasted for the year.
But the bull market in stocks isn't dependent on Fed rate cuts, Siegel said, meaning gains could still pile up if the Fed doesn't move as aggressively to cut interest rates.
"I much rather have a stronger economy with better earnings than the Fed rapidly lowering rates because they see a recession. I don't think a bull market really depends on lowering rates as quickly," he added.
Wall Street strategists are generally anticipating another positive year for stocks as recession fears fade. Goldman Sachs, Deutsche Bank, and BMO are also calling for an 8%-10% gain in the S&P 500 this year. Top forecasters like Ed Yardeni are calling for as much as a 17% gain in the benchmark index.