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Jeremy Siegel

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Jeremy Siegel: 10% Stock Gain Possible in 2024

By Dinah Wisenberg Brin

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What You Need to Know

  • Small-cap value stocks trading at much lower multiples could do especially well in the coming months.
  • The emeritus professor also suggested that the economy seems to be growing at a just-right pace.

Jeremy Siegel expects “another good year” for the S&P 500 in 2024, with an 8% to 10% price gain.

Value stocks, particularly smaller-cap value stocks trading at much lower multiples, could fare even better, with around a 15% appreciation, Siegel, the Wharton School economist, said Monday on the WisdomTree blog.

“We started off the year with some profit taking in tech stocks. No one wanted to pay capital gains tax in 2023, so those who wanted to reduce tech exposure delayed sales until 2024,” he wrote, adding that WisdomTree’s model portfolios delayed trades for the same reason.

As for the bond market in the long term, the Wharton emeritus finance professor and WisdomTree senior economist indicated he doesn’t see much upside for 10-year Treasurys.

Siegel expects Federal Reserve interest rates to settle around 3% to 3.5% beyond this year, with a 50- to 75-basis-point positive “term premium” — the investor premium for making a long-term bond investment.

“This would get a 10-year yield closer to 4%. That happens to be where the 10-year Treasury is trading today, so the upside on adding to bond duration here seems small given the yield sacrifice that has to be made,” Siegel wrote.

Economic data released last week suggests that the economy is progressing at a healthy pace,

“I would even call it a ‘Goldilocks’ pace,” Siegel said. “The data is not too strong to encourage the Federal Reserve to tighten and certainly not too weak to start a slowdown in corporate profits.”

The Middle East conflict and the danger to cargo ships in the Red Sea have pushed oil prices up and could lead to other supply chain delays, generating inflationary pressure, Siegel wrote.

“But so far these tensions are only impacting oil,” he said, “and we see no signs in other commodities, which have been stable if not declining.”

Siegel said he disagrees with those who think the Fed needs to make six rate cuts this year to have a good 2024.

The key point from the recent Federal Open Market Committee meeting was Jerome Powell, the Fed chair, being more flexible and willing to cut rates on economic weakness, he said, adding, “If real economic growth stays strong, the Fed could keep rates exactly where they are, and we could have strong equity markets.”

Powell’s flexibility lowers the probability for recession and raises chances for continued growth or a softer landing, Siegel wrote. An inflation flare-up could turn the economy more negative, “but I think the prospect of that is low.”

(Photo: Lila Photo for TD Ameritrade Institutional)

Dinah Wisenberg Brin

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