Jeremy Siegel: The Market is Not in a Bubble; The S&P Could Reach 5,000 in 2022

Jeremy Siegel is the Russell E. Palmer Emeritus Professor of Finance at the Wharton School of the University of Pennsylvania and a senior investment strategy advisor to Wisdom Tree Funds. His book, Stocks for the Long Run, now in its fifth edition, is widely recognized as one of the best books on investing. It is available via the link on this page. He is a “Market Master” on CNBC and regularly appears on Bloomberg, NPR, CNN and other national and international networks

This is my 14th annual interview with Jeremy, which we do just before Thanksgiving. He has been one of the most prescient forecasters among those featured in Advisor Perspectives. You can access our prior interviews here: 2020, 2019, 2018, 2017, 2016, 2015, 2014, 2013, 2012, 2011, 2010, 2009, and 2008.

I spoke with Jeremy on Wednesday, November 24th.

We spoke on November 19th last year, almost exactly a year ago. The S&P then was at 3,562; yesterday it closed at 4,689, for a gain of 31.7%. You correctly predicted that bull market in our interview. Congratulations. What should U.S. equity investors expect next year? What is the fair value of the S&P 500?

Last year was one of my best years for forecasting. It's important to understand why I had a number of accurate forecasts. It is because of my background in monetary theory and policy, the topic I wrote my PhD dissertation on. When I spoke to you last year, I saw the tremendous, unprecedented boost in the money supply that the Federal Reserve was creating. It turned out that 2020 was the greatest one-year M2 money supply increase in the 150-year history that we have such data. That money was going to the financial markets and then broke out into inflation in 2021. It's very hard to predict year-to-year movements in the stock market. My basic thesis is that this push of demand and liquidity is still going into the markets. However, the Fed is going to have to move very aggressively against it, and then there's going to be tremors in equities.

I see a upward move continuing until the Fed gets serious about inflation, and that could be as early as December 15th if we get another bad CPI number on the 10th of December. It might take until early next year, when the market will flatten out because the Fed is going to hike much faster than people think.

If I had to give a target next year, it is 5,000 for the S&P 500. But one should always take one-year predictions with a grain of salt given the volatility of the stock market.