Finance professor Jeremy Siegel predicts that the Dow Jones industrial average will surge to 24,000 by the end of this year if President Donald Trump and the Republicans on Capitol Hill can somehow enact corporate tax reform.
"I would love to see personal tax reform and lower those personal rates but what I think what is more probable and what I think Congress should attack first is corporate tax reform," the finance professor at the University of Pennsylvania's Wharton School told CNBC a day after the Dow closed above 22,000 for the first time ever.
In late trading Thursday, the Dow rose marginally and was on track for a record high close, Reuters reported. At 2:14 pm ET, the Dow Jones Industrial Average was up 0.07 percent at 22,032.38, which would be a record high close.
Siegel said the Dow could get "another thousand" points out of strong earnings alone.
"What the stock market cares about is interest rates and earnings. And both of them are doing well," Siegel said.
The Dow has gained more than 20 percent since the election as of Wednesday's close; the S&P has risen over 15 percent; and the Nasdaq has climbed more than 22 percent, according to CNBC.
Experts agree that Wall Street has shrugged off a recent failure by a Republican-controlled Congress to overhaul healthcare as well as doubts about how easily Trump will be able to fulfill promises to cut taxes and increase infrastructure spending.
"There was a time earlier this year that the market was politically driven. I think the market is just numb to it at this point,” Matthew Peterson, Chief Wealth Strategist for LPL Financial at Charlotte, North Carolina, explained to Reuters.
Siegel, a longtime stock bull, predicted on CNBC in February that Dow 22,000 was "on the horizon." The index was trading around 20,504 at the time, CNBC reported.
"The market is going up on the Republican agenda. It's not going up on the Trump agenda," Siegel said. "The only thing about Trump is he's not going to veto the legislation that Congress has. And that's a positive," he said.
Siegel said the "fiasco" with the Senate Republicans' healthcare bill makes Congress more determined to get something done with tax reform.
"What they thought is that they're going to get a trillion dollars from the health-care reform. Of course that was pie in the sky," he said.
Trump took to Twitter to trumpet his success in delivering an economy that just witnessed the blue-chip Dow Jones Industrial Average close above the 22,000 mark for the first time.
The Dow eclipsed 22,000 for the first time Wednesday, part of an 11 percent increase thus far in 2017.
Trump himself claimed credit for the surge, noting on Twitter Tuesday that the Dow stood only at 18,000 points around Election Day and crowing Wednesday that "we have a lot of things happening that are really great."
But leading analysts attribute the market's latest push higher primarily to strong results from blue-chip companies, most recently Apple, by far the biggest gainer in the Dow Wednesday rising 4.7 percent, AFP reported.
The more than eight-year-old bull market in U.S. stocks got a second wind after last year's election of Trump as U.S. president, on expectations that his business-friendly policies including tax cuts and deregulation would boost corporate gains and economic growth.
Meanwhile on Wall Street, investor fears about the sustainability of the gains took the shine off the round number Dow milestone because some technical indicators were flashing warning signs, Reuters reported.
"The market gain has been built on a narrow group of issues. That typically is not indicative of great health," said Mark Luschini, chief investment strategist at Janney Montgomery Scott in Philadelphia. "I would not be shocked ... if we saw a pullback."
And with the Dow industrials at a record high, Dow theory suggests that the Dow Transportation Average index should also hit a record in order to confirm the market's march higher. But that index trails the Dow industrials' year-to-date performance by almost 10 percentage points and is nearly 6 percent below its own July 14 record high.
Naeem Aslam, chief market analyst at Think Markets in London, said the Dow milestone was "a remarkable thing for investors ... but at the same time, this could also be a trap if the momentum does not follow."
But tax cuts and other parts of the Trump agenda have not materialized, leaving earnings growth as the real engine of the market.
"Earnings growth allows the market to be patient about Washington. It allows the market to be patient about fiscal reform," said Steven Chiavarone, portfolio manager at Federated Investors in New York, who said they would "be buyers on any weakness."
Fundamentals remain strong. With 350 of 500 companies' reports in, the S&P 500 index is on track to post back-to-back double-digit quarterly earnings growth for the first time in almost six years.
Still, the market is expensive by historical standards. Investors are paying $18 for every $1 in expected S&P 500 earnings over the next 12 months, near the highest since 2004 and above the long-term price-to-earnings average multiple of 15.
"The market isn't without issues as it relates to valuations which are full if not somewhat expensive," said Mark Luschini, chief investment strategist at Janney Montgomery Scott in Philadelphia. He expects the Dow to go beyond 22,000, however.
(Newsmax wires services the Associated Press, Bloomberg and Reuters contributed to this report).
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