Stock-market guru Jeremy Siegel, professor of finance at University Pennsylvania, has predicted that the Dow Jones Industrial Average will rise to 20,000 next year.
But he says that's no guarantee, as stocks are moving closer to fair value.
Last December, Siegel predicted the Dow would hit 18,000 this year, which it did this month.
"The last three, four years, I thought this was easy. I mean, it was a slam dunk," he told
CNBC. "The market was so undervalued, with interest rates so low and earnings momentum going up."
Now, "earnings momentum is going up, but we are closer to fair market value."
Stocks will likely stay below fair market value, because interest rates will remain below historical norms, Siegel said.
"Do you know that the S&P in real terms, in other words corrected for inflation, is still not where it was 15 years ago? It still has not gotten back to where it was after inflation. People say it's crazy high and back to where it was, [but] we're not there at all," he noted.
"I think we're going to see fed funds long run maybe 2 percent instead of 4 percent, and that lower interest rate is going to feed people to move into stocks," he said.
The Federal Reserve has kept its federal funds rate target at a record low of zero to 0.25 percent for six years and is expected to begin raising rates around mid-2015.
Many other market participants expect more gains for stocks next year too.
"The U.S. economy is doing well," Herbert Perus, head of equities at Raiffeisen Capital Management in Vienna, told
Bloomberg.
"Some stocks seem overpriced, but if you look deeper into the market you find a lot of well managed companies with good products that are still not expensive."
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