LINDA WERTHEIMER, HOST:
The end of the stimulus has not rattled the markets. In fact, the stock market has rocketed to record highs this year. To hear more about why the market has been surging and what it says about the economy, and what it might mean for the year ahead, we're joined by Jeremy Siegel. He is a professor of finance at the Wharton School of Business at the University of Pennsylvania. He joins us from member station WHYY in Philadelphia.
Professor Siegel, thank you for being with us.
JEREMY SIEGEL: Happy to be here.
WERTHEIMER: So this stock market does not seem to be discouraged by anything. What do you think is pushing it up?
SIEGEL: Well, I think there's three big negatives that have now really been pretty much removed from the market. Looks like there will not be a battle over the debt ceiling early next year, which could threaten a default. That seems to be off the table. The two hotspots in the Middle East, Syria and Iran, are less hot. Most experts say it has cooled off; a chance of a military strike has been greatly reduced by the diplomacy.
And perhaps most important is that the taper, the market...
WERTHEIMER: That is the Federal Reserve tapering a number of bonds that it buys.
SIEGEL: Exactly. They had a mild taper, but at the same time they said we're going to keep short term interest rates low for even longer than we earlier anticipated and combined with some very strong economic data in the last two or three weeks, I think has certainly given good reason for why the stock market is going up.
WERTHEIMER: Do you think the economic outlook is seriously getting better at a level where people will really feel it, people who are not the market?
SIEGEL: I think so. Well, first of all, we have brought down the unemployment rate pretty considerably this year. GDP growth has been disappointing. I think, again, the clouds are parting. We've had restoration of consumer's balance sheets. They're not quite as fearful of being laid off as they were before. I think all that will restore a more normal recovery than what we've experienced over the last two or three years.
WERTHEIMER: Well now, as you point out, one of the great lessons of 2008 is that what goes up will also come down. You want to take a crack at when or why the surging stops?
SIEGEL: Well, if I could do that I would probably be as rich as Warren Buffett. I still think we have a good 10 percent rise left in this market. I do not think that this is a bubble at all. Of course, the last bubble was really in real estate, not so much in stocks. Sub-prime mortgages have all but disappeared, so the real estate market is on much sounder footings. So 2014 might finally be the year where we have a good recovery, at least that's what a lot of market analysts believe now.
WERTHEIMER: And you?
SIEGEL: And I think they're going to be right.
WERTHEIMER: Jeremy Siegel is a professor at the Wharton School of Business. He joined us from member station WHYY in Philadelphia. Jeremy Siegel, thank you for speaking with us.
SIEGEL: Happy to do so. Transcript provided by NPR, Copyright NPR.