S&P to 3000? Morgan Stanley Experts Make the Case

The finance guru said early Tuesday on CNBC, "We are creeping closer to fair market value [for stocks], which I think is approximately 18 times S&P earnings," he explained.

Still, he remains bullish and sees the Dow Jones Industrial Average hitting 18,000 by year-end.

"Our economy is the best of the three major engines in the world, and that's why I have faith in U.S. stocks," Siegel said during the TV interview.

Market Momentum

The overall economic view highlighted by Parker and Zentner in their report, "2020 Vision: Long Live the Expansion," is that the U.S. economy is in "a prolonged period of deleveraging … coupled with an uneven global recovery.

The implication of this mixed-growth story, they say, is that the U.S. economy "is actually only in the early parts of its growth cycle. It is also uniquely positioned in the world, benefiting from low volatility, healthier balance sheets and a lack of corporate exuberance."

The Morgan Stanley experts summarized their argument as follows:

• The world economy is not in sync. Major regional economies are at different points along the growth cycle. In general, DM is leading while EM is lagging.
• Volatility in the U.S. continues to trend lower, which can extend the life of expansions.
• Deleveraging in the U.S. is ongoing, albeit largely complete, and balance sheet priorities have shifted.
• Interest payments on debt burdens are ultra-low, and household debt dynamics suggest there exists a sizable cushion protecting consumers in a rising interest rate environment.
• Capital spending and inventories do not look stretched.
• Corporate management hubris and other corporate metrics of overheating remain muted.
• Several broad economic indicators in the U.S. have only just reached "normal" expansionary levels and are far from looking unsustainable.

"We think the market is going higher," said Ari Wald, Oppenheimer's head of technical analysis, in an interview on MSNBC lst week. "We were buyers in early August, and we are still buyers."

In May, Jeremy Grantham, co-founder and chief investment strategist of Grantham, Mayo, Van Otterloo & Co., outlined his view that the market most likely won't see a major turn until after the S&P 500 hits a high of 2,250, but then the bulls could take over and pound investors — mostly like in late 2016.

It's Grantham's belief that the stock market bubble is still inflating.

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Check out Jeremy Grantham: Market Crash 'Not Imminent'; Bubble Still Inflating on ThinkAdvisor.