About a month ago, stock market guru Jeremy Siegel, professor of finance at the University of Pennsylvania, was losing faith in his longstanding forecast that the Dow Jones industrial average would reach 18,000 by year-end, but his faith has been restored.
"I believe the next six or seven weeks are going to take us beyond 18,000 on the Dow," Siegel told CNBC Tuesday.
The Dow has rebounded 11 percent from its Oct. 15 low, hitting a record 17,638.21 Tuesday before ending at 17,614.90. Reaching 18,000 would represent a gain of 2.2 percent from Tuesday's close.
The Federal Reserve is expected to begin raising interest rates next year, but that wouldn't hurt stocks, he said.
"I'm not afraid of a 2 percent increase in the fed funds rate," Siegel said. "Bull markets don't end when the Fed starts raising rates. They continue for nine months to 2½ years. It's at the final stages of rising rates when you have to be worried."
The Fed's federal funds rate target currently stands at a record low of zero to 0.25 percent.
Given that rates will stay low, "stocks deserve a higher valuation," Siegel said. "Stocks can trade at 18, 19 or even 20 times earnings, and they still would not be terribly expensive."
The S&P 500 had a forward price-earnings ratio of 16.7 Friday, according to Birinyi Associates.
Meanwhile, many investors will sell some of their losing stocks near year-end to book a tax loss, providing excellent buying opportunities for the rest of us, says MarketWatch columnist Brett Arends.
"It comes around every year, usually in late November," he writes. "Think of it as Black Friday for Wall Street’s contrarians. This rushed selling tends to drive down the prices of the stocks in question even further for a couple of weeks."
There should be plenty of candidates, Arends says. A whopping 139 of the companies in the S&P 500 have seen their stocks drop so far this year.
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