- Jeremy Siegel, a Wharton finance professor, told CNBC that the stock market would not lose upward momentum if the US were to experience another wave of COVID-19 cases.
- Siegel said that because stocks are so forward-looking, a short-term lapse in the economy would not stop long-term moves higher.
- The professor also said he believes both tech stocks and cyclical stocks would go higher in 2021 as US states begin to fully reopen.
- Visit Business Insider’s homepage for more stories.
The Wharton finance professor Jeremy Siegel told CNBC on Tuesday that another wave of coronavirus cases likely wouldn’t derail the stock market’s march upward.
“We’re not anywhere getting near down those March lows. A little pause if we get that wave, but I don’t think it’s going to really stop the longer-term momentum,” Siegel said.
The S&P 500 has rallied more than 55% since its March 23 low. It traded 0.07% higher on Tuesday.
Siegel said that the forward-looking nature of stocks and the continued liquidity provided by the Federal Reserve would be a “really powerful force” for the market’s drive. The professor said that even if an effective coronavirus vaccine takes another six months or more, stocks would still move upward in a V-shaped recovery.
Read more: BlackRock unpacks the 4 biggest changes it has made to portfolios since the crisis began 6 months ago — and shares how it’s positioning to thrive in a post-COVID world
“That’s why you could have a U economy, a W economy, and you can still have a V stock market, because of that forward-looking component,” he said, adding that 90% of the value of a stock depends on its earnings more than 12 months in the future.
He also discussed the popular debate about whether investors should buy more tech stocks or pivot into cyclical stocks as the US begins to recover.
“I think there’s room for both groups to go up in 2021,” Siegel said.
Siegel said he believes that even if cyclical stocks outperform the market next year, it doesn’t mean tech stocks have to go down. The coronavirus pandemic has demonstrated to the economy how important tech is, and that’s not going away, Siegel said.
Read more: US investing champion David Ryan famously garnered a compounded return of 1,379% in just 3 years. Here is the 11-part criteria he uses to find the next big winner.