A Wharton School finance professor Jeremy Siegel predicts that the current bull stock market may “pause” in 2018, yielding skimpier single-digit returns for investors. "We have one more push and I think it's connected with the corporate tax reform," he told CNBC, adding that the market is "clearly near to a top." Next year he sees returns of less than 10 percent. While he's not warning everyone to sell everything, he sees valuations and political uncertainty slowing down the stock market in 2018. "Clearly now at these valuations we're not going to get the double-digit returns that certainly we've gotten over the last six or seven years, on average," he said. Siegel expects returns under 10 percent. "What do you look forward to in 2018 that could keep this market … as buoyant as it's been this year? It's been a great run," he said. "We might have a pause." However, just when the bull run will start to ease up is still very much up in the air. Meanwhile, the bull run since 2008, in U.S. stocks in particular, against a backdrop of steady economic growth, is leaving even skeptical fund managers and analysts reluctant to predict a near-term pullback, according to participants at the Reuters Global Investment 2018 Outlook Summit in New York. Still, even as they advise investors to stay in the market, they also see the need to be wary of what they see as widespread complacency about valuations and be prepared for a bumpy ride in the year ahead. The S&P 500, for example, now trades at 18 times next year’s earnings, according to Thomson Reuters data, versus a long-time average of around 15. Stocks with small market capitalizations are even pricier still, at nearly 25 times next year’s earnings, making them more expensive than they have been 96 percent of the time over the past three decades, according to Joel Greenblatt, co-chief investment officer at Gotham Asset Management LLC. Markets this pricey tend to deliver low-single digit percentage returns in the ensuing 12 months, Greenblatt’s research shows. “People and pension plans have had to put more money in the equity markets and that has been beneficial to them - so they’ve actually gotten rewarded for bad behavior,” said Avenue Capital Group LLC co-founder Marc Lasry. “What I find amazing is that nobody believes any exogenous event is going to occur. I worry about the unexpected.” Geopolitical risks such as a Chinese economic slowdown due to high debt levels, the North Korean missile crisis, political changes in Saudi Arabia that could disrupt Middle East oil supplies, and the outlook for the UK economy due to the Brexit decision last year are all being discounted by investors. Markets have not been reacting normally to risk, said Michael Vranos, who oversees $6.5 billion at Ellington Management Group LLC. “I’ve personally been surprised how the market has shrugged off all this geo-political risk,” he said. BlackRock Inc. Chief Executive Larry Fink said economic growth in Europe, the U.S. and Asia is happening at the same time for the first time since the 2007-2009 global financial crisis. That is good news, but it has lulled some investors to sleep. “The biggest risk I see in the world is this benign confidence that volatility is not creeping up,” he said. Fund managers surveyed by Bank of America Corp (BAC.N) are wading into the stock market. The average investor they surveyed was holding only 4.4 percent of their portfolio in cash, the lowest level since 2013, as they boosted stock buying. “Earnings are going to be okay,” said Mario Gabelli, chief executive of GAMCO Investors Inc. “The business sector is feeling more confident.” The U.S. stock market in particular has also benefited this year from expectations for a tax overhaul promised by President Trump
