Wharton School professor Jeremy Siegel told CNBC on Tuesday that new stock market highs this year is “a real possibility,” even as the economic consequences from the coronavirus remain present.
“In fact, given no serious second wave, which could mean just effective therapeutics without even a universal vaccine, my feeling is it’s even a likelihood that we will reach” fresh record highs, Siegel said on “Halftime Report.”
Siegel’s comments Tuesday came as the S&P 500 eclipsed the 3,000 mark for the first time since March 5 during a strong session for stocks. The S&P 500 was up around 1.9% intraday while the Dow Jones Industrial Average rose more than 660 points, or 2.7%.
The S&P 500 entered Tuesday’s session more than 34% from its coronavirus-driven bottom on March 23. Siegel has said that is “definitely going to be the low” during the crisis, unless there is a second wave of Covid-19 cases.
The S&P 500 posted its record intraday high of 3,393.52 on Feb. 19, followed shortly thereafter by major sell-offs in response to the economic shocks from the virus. To set a new record high, the broad index would need to rise more than 12% from Tuesday’s session high.
Siegel, a longtime bull, has said unprecedented liquidity supplied by the Federal Reserve in response to the crisis is a large reason why the market has rallied from its March lows, even as tens of millions of Americans filed for unemployment benefits.
“There’s no way they’re taking that back, and as a result, that is all going to be flowing into the stock market and the economy,” Siegel said, arguing that the stock market’s recovery will outpace that of the fundamentals of the U.S. economy.
But, he added, “I think there’s going to be a recovery all the way around and we’re going to all be thankful for the recovery that we’ve had.”
Siegel said he believes strict lockdown measures imposed by state and local governments, meant to help slow the spread of Covid-19, will in retrospect be viewed as “the wrong policy” decision. He said those measures caused unnecessary economic pain, hurting small businesses while aiding large companies that were deemed essential retailers.
“One of the unfortunate things about the lockdown is we’ve actually improved the prospects of the very companies in the stock market,” he said. “We’ve widened the gap between large and small, and between those people feeling the pain and those people that have their portfolios.”