Investors are a 'little behind the curve' on Federal Reserve interest-rate hikes, and that could roil stocks over the next week, says stock-market guru Jeremy Siegel, a finance professor at the University of Pennsylvania.
"If you look at the fed funds futures market, they are below the rates the FOMC [Federal Open Market Committee] members believe are going to prevail at the end of the 2015 and 2016,"
Siegel tells CNBC.
"There is some room for some volatility in the [stock] market over the next week when they realize that this period of zero rates is going to end," he notes.
Editor’s Note: New Warning - Stocks on Verge of Major Collapse
"But if you take a look at the big picture, rates are still so extraordinarily low that money will continue to flow into equities."
A new survey of fund managers from
Bank of America Merrill Lynch shows that 48 percent of those surveyed believe the Fed will raise rates in the second quarter of 2015, up from 38 percent in August.
Siegel expects the Fed, in its policy statement Wednesday, to drop the words "considerable time" from its description of how long it will keep the federal funds rate target at a record low after finishing its quantitative easing.
To be sure, Siegel sees any weakness in the stock market as temporary. "If you take a look at the big picture, rates are still so extraordinarily low that money will continue to flow into equities," he said.
Siegel still predicts the Dow Jones Industrial Average will hit 18,000 by year-end. It stood at 17,131.97 Wednesday morning. He believes GDP growth will be between 3 and 4 percent for the second half of the year and S&P 500 earnings will be $120.
Editor’s Note: New Warning - Stocks on Verge of Major Collapse