Legendary market bull has 2 worries
Finance professor Jeremy Siegel still expects the Dow to hit 18,000. But he's concerned about the labor force and commodity prices.
Siegel, a Wharton professor of finance, said on Tuesday's episode of "Futures Now" that a sharp rise in commodity costs could change his take entirely.
"If I saw commodities really increasing in price -- I mean, we've had a little bump in oil, we know why we had that yesterday, with the threat of war, and shutoffs of supply, and embargoes against Russia -- but anything that sparks any inflation at all" is a serious concern, Siegel said.
"The commodity prices have been holding up better than I would think given the slowness in the economy. But if that started flaring up, not only is taper going to be maintained -- it could be accelerated by the Fed," Siegel said.
The issue is that the Federal Reserve's quantitative easing program, and its ultralow federal funds rate, both depend on low inflation. If rising energy prices suddenly spur inflation, then the Fed could be forced to pull back, potentially causing interest rates to spike and thus hurting the market.
"If we see some of these commodity prices rise up the way we did yesterday to continue to rise up," then the Fed is "going to be geared" to cut back on quantitative easing and increase the federal funds rate.
For that reason, rising commodity prices "would be a concern for me," Siegel said.
Siegel's other concern, which also pertains to rising costs, is the labor force.
While many complain that the unemployment rate looks artificially low due to the unusually low participation rate, Siegel frets that it could actually be lower than the stated 6.6 percent. That might sound like good news, but it would mean that if companies need to hire additional workers, then they need to raises wages. That would put a serious damper on the corporate profits that undergird stock prices.
"The labor market -- even though the unemployment rate is 6.7 percent, 6.6 percent -- it might be tighter than we think," Siegel said. "We might be closer to a bottleneck there -- although we are seeing no wage increases -- than we are concerned [about]. And that does concern me. Because these optimistic earnings estimates won't be reached unless we still have slack in the labor market to employ people."
These concerns aside, Siegel still recommends that investors buy stocks, saying we could be in "about the fourth or fifth inning of the bull market."
More from CNBC
- Cramer: Make way for this ‘monster momentum stock’
- We’re only in the bull markets’s 4th inning: Siegel
- Bank stocks to double, says Dick Bove
We are all grateful that we don't work at Staples or Radio Shack.
Dave, I have to tell you that I am just an employee in a small company and I normally have 2 people that work for me. I am not part of corporate America and no agenda to skew info -- just my own recent experience. 1 of my 2 was promoted (deservedly"
First of all they don't work for you, they work with you. You just happen to be the one supervising them. I don't know if you did or didn't deserve your new position, I do however know that many times companies want the World of a New Employee while not paying anywhere near an legit Wage to make that Job worthwhile for anyone applying.
Sure, everybody can't be the Chief and there has to be some Indians. However many times the so called supervisor is less educated then the one they are suppose to train. Folks many times don't want to actual train anyone properly in FEAR of losing their Job to that person. I understand those FEARS. However, Corporations have successfully played workers against Workers. The End Result is that the Barking Dogs Bags all the Profits aka Benefits and the Workers doing the actual Work see very little of those Benefits.
You can't get something for nothing yet that's exactly what so many Corporations are trying to do. Since most Americans are smarter about Wages these days, Corporations have decide to use Slave Labor as leverage, regardless of Country. Barking Dogs increase their Benefits while decreasing the Benefits of everyone else. Welcome Back, to the New, Old World Order.
The trucking industry is looking for qualified drivers. Many companies have had shipments postponed weeks due to lack of drivers being available. This area may be where many people could find a high paying job.
Actually he might be right. When you consider the massive rarely talked about underground Job Market and the FACT that a ton of folks are choosing early Retirement, it might not be as crazy as it sounds.
If more folks are living in one Home and some are caring for Parents as opposed to sticking them in nursing Homes, that also comes into play. Women are far more in the Work force then in the past and maybe a ton of Men are now Housewives.
Things are rarely as cut and dry as some posters want you to believe.
" That might sound like good news, but it would mean that if companies need to hire additional workers, then they need to raises wages. That would put a serious damper on the corporate profits that undergird stock prices."
So we now have markets based on slave wages. God forbid the Billionaires share with those that are making them rich. If the economy ever swings back to demand for employees, look out for the crash.
SO TYPICAL, I leave for a while and the whimpy right wingers tell lies about me and stab in the
back.They hate when I tell the truth.The Fox sheep just nod their heads when the O`Reilly`s
split lies out.
BARRY.......Veritas or VV is calling for the Ball Cupping, Burro Bride on Cramer's Article that just hit the site...Don't let the keyboard, hit you on the azz....3...2...1.
Time for Brunch...
ICE COLD:I love my MLP`S.Bsides great dividends,90% of the dividends are tax free.It`s best
owning them thru a mutual fund because of the K1 forms needed at tax time.
Copyright © 2014 Microsoft. All rights reserved.
New study finds members of this global elite are stashing an average $600 million each in cash -- 10 times more than a year ago.
VIDEO ON MSN MONEY
Top Stocks provides analysis about the most noteworthy stocks in the market each day, combining some of the best content from around the MSN Money site and the rest of the Web.
Contributors include professional investors and journalists affiliated with MSN Money.
Follow us on Twitter @topstocksmsn.