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.

By MSN Money Partner Mar 5, 2014 5:38PM
Image: Bull figurine on ascending line graph and list of share prices (© Adam Gault/OJO Images/Getty Images)By Alex Rosenberg, CNBC

Jeremy Siegel is one of the most famous market bulls, and he reiterated his positive take on Tuesday with a call for the Dow Jones industrials ($INDU) to rise to 18,000. But he also mentioned two things that worry him right now: a potential lack of slack in 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

Mar 5, 2014 8:14PM
Companies have stated 3 Million Unfilled Positions in Skill Job positions. Millions of jobs are waiting to be filled, but employers say they can't find qualified workers because of a skills gap. They can spend over $500Billion per year buying back Corporate Stock thanks to rigged Treasury Markets but they can't find a Dime to spend on retraining Workers.
Mar 5, 2014 8:43PM
If everyone that was still really unemployed had stayed on the list instead of dropping them off to make things look good unemployment would probably be over 15%. You don't see food stamps dropping below 48 million and those are the unemployed and under employed. So screww them the politico's are saying we need to look good.
Mar 5, 2014 7:42PM
Labor market tighter then we think? This guy must've just got back from a Rocky Mountain High.
Mar 6, 2014 12:11PM




We are all grateful that we don't work at Staples or Radio Shack.



Mar 6, 2014 12:37PM
The labor is weak this guy's propaganda. I'm working a very good job and bene's. But many un or under employed. That's why at job fairs lines go for blocks, thousands show up for a handful of jobs because there so many jobs available. What a pacify article.
Mar 6, 2014 11:06AM
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. 

Mar 6, 2014 8:50AM
Mar 5, 2014 8:05PM
"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 --"

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.
Mar 6, 2014 1:49PM
Let's see...Radio Shack announced they are closing over 1,000 stores, Staples announced they are closing 250 stores, Sears continues to close stores etc.  In addition, the Feb jobs reports were well below expectations, new home construction was down 16% and existing home sales are slowing down and despite all this negative economic news the market continues to rise.  But if the market does drop...the financial experts and or govt controlled media will blame it on anything they can including the weather as it was too cold, snowy etc.  So if the market drops in June-Aug we can blame it on the weather as it will be too sunny and everyone headed to the beach rather than shop for cheap Chinese made products.  So if all these companies are doing so well and reporting record profits etc. then why aren't they hiring?  The jobs being created in America for the most part are low paying, part-time positions with no benefits and that is not what will get our economy back on track contrary to what our govt says.  We have an economy built and supported by nothing more than bullsh*t and that's the TRUTH!
Mar 6, 2014 11:58AM
Yeah, yeah, yeah, we know professor Dooshberry. The whole stinking stock market and commodity prices are dependent on the fed. Same old sickening story and one you'd expect out of communist China or Cuba; not the USA.
Mar 6, 2014 12:30PM

" 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.

Mar 6, 2014 1:51PM
A responsible citizen should be aware of his surroundings and the causal effects of his actions.  A "good" citizen would never knowingly give another person an excuse to fail.  Particularly a young person.   Young folks are by nature insecure and that is why we have always been told that adults need to set a good example for the young.  To even speak of race and make derogatory remarks about folks race or religion are giving younger citizens who may question their own validity excuses to fail.  And in my opinion this is stupid.  You like to see kids fail keep talking hate and race ABS.  You my friend by your own actions and hate statements are an idiot.
Mar 6, 2014 10:12AM
It is not just employment it is wages and benefits.  With few now engaged in 401ks they actually have more take home.  And now with the ACA they will lose that on the other end.  Never discount quality of life as well.  A friend got an e-mail from his son who said he now has three part time jobs in the Bay area. All in all I have followed Jeremy for some time but he is from the Academic world much like the guy in the Big House.  God forbid those darn wage increases workers want.  We all know commodities are such a pain in the butt but to wish for stagnant wages and no increase in commodity prices is like an anti human adventure.  Perhaps we need robots to make this a more perfect world.
Mar 6, 2014 1:52PM
If labor is a bottleneck despite 6.7% unemployment, it implies those 6.6% will NEVER get another job in America, because of a skills mismatch.  Retraining doesn't seem to work as presently constituted
Mar 6, 2014 2:07PM
This is why you diversify and own copper mining stocks for example, maybe steel.  Of course China is the counter balance which could drag their performance down.  but a hedge is a good thing.
Mar 6, 2014 5:15PM

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.

Mar 6, 2014 2:10PM

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... 

Mar 6, 2014 5:38PM

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.

Mar 6, 2014 2:03PM
Between the federal ($750 billion) and state ($150 billion) governments spending $900 billion taken from the private sector and just given to people whose families haven't worked for generations it seems they should be re-training workers they failed to prepare for American society in public sector schools paid for and built by the private sector.
Please help us to maintain a healthy and vibrant community by reporting any illegal or inappropriate behavior. If you believe a message violates theCode of Conductplease use this form to notify the moderators. They will investigate your report and take appropriate action. If necessary, they report all illegal activity to the proper authorities.
100 character limit
Are you sure you want to delete this comment?


Copyright © 2014 Microsoft. All rights reserved.

Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.


StockScouter rates stocks from 1 to 10, with 10 being the best, using a system of advanced mathematics to determine a stock's expected risk and return. Ratings are displayed on a bell curve, meaning there will be fewer ratings of 1 and 10 and far more of 4 through 7.

124 rated 1
266 rated 2
452 rated 3
702 rated 4
671 rated 5
604 rated 6
640 rated 7
495 rated 8
267 rated 9
158 rated 10

Top Picks




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.