Siegel on Dow 16,000, Bond Bubble

Wharton professor and author Jeremy Siegel thinks the Dow Jones Industrial Average will pass the 16,000 mark by the end of the year, on the back of earnings growth and multiple expansion. Siegel tells Bloomberg he thinks investors will start becoming impatient with ultra-low bond yields and near-zero money market interest rates, pushing them to pay higher prices for stocks. Historically, he says, when interest rates have been this low, P/E ratios have been significantly higher than they are now. Siegel also talks about how raising reserve requirements should be a key part of the Federal Reserve’s exit strategy for its easing policies, and he says he thinks bonds are in a bubble that is going to pop sooner or later. He thinks a bit of improvement on the economic front could be the catalyst for the popping, and, since he expects GDP growth to accelerate to 3% to 4% in the second half of the year, he says the popping could come fairly soon.

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