The tech business momentum driving market gains is likely to continue, says WisdomTree’s Jeremy Siegel.
“Often the ending is exaggerated, but the ending is often further in the future than many people think,” he said.
Siegel projects that stocks will outperform bonds over three to five years, providing real returns of around 5%.
The tech business momentum that has propelled the stock market higher over the past year and a half will likely continue much longer than expected, according to WisdomTree economist Jeremy Siegel.
Siegel told CNBC on Thursday that gains seen in AI stocks like Nvidia, Broadcom and others show no signs of slowing down.
“I think the business momentum in tech and AI is still there. It’s been so powerful. It takes a lot of bad news to break a dynamic trade and we just haven’t figured it out ” said Siegel.
While the S&P 500 is up about 14% year to date, the tech-heavy Nasdaq 100 is up 17% and Nvidia, which is responsible for 35% of the annual return of the S&P 500, is up 162%.
“Let’s be realistic, these stocks have delivered the bacon, as they say, and as long as they do, these momentum traders are going to crowd these stocks, so I don’t see this ending anytime soon,” Siegel said .
“Of course, we often get over it, but the end is often further in the future than many people think.”
In a recent interview with the Facts vs. podcast. Feelings from Carson Group, Siegel highlighted a personal anecdote about why it’s so difficult to call the top of a stock market bubble.
“I had a really good colleague at Wharton… he started shorting Internet stocks in 1999. They were way overvalued then. But he got margin calls and eventually had to cover his short positions at the top,” Siegel said. “So it’s very difficult to bet on a bubble.”
But Siegel doesn’t believe today’s stock market is in a bubble because, unlike in the late 1990s, profits are actually supporting today’s record stock prices.
“I don’t think current AI is a bubble. Look at Nvidia, it’s a really solid company, it’s selling for 35-40 (times earnings). The other companies I mentioned were selling for 200 and 300 (times earnings). Big difference,” Siegel said.
Siegel continues to believe that over the next three to five years, after accounting for inflation, stocks will outperform bonds and generate considerable real returns.
“My three-to-five-year forecast for the entire stock market is a 5 percent rate of return after inflation. That’s after inflation. I think it’ll be a little bit more,” Siegel said.
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