The stock market’s coronavirus-driven bottom in late March is “definitely going to be the low” during the crisis, Wharton School professor Jeremy Siegel predicted.
Siegel said the massive monetary policy response from the Federal Reserve, along with additional progress on treatments and vaccines for Covid-19, could really boost stocks next year.
“I think 2021 could be a boom year,” Siegel told CNBC.
“With the liquidity that the Fed is adding, unprecedented. It could be a really good year,” Siegel said.
The S&P 500 touched its most recent bottom of 2,191 on March 23, but it has since rallied. As of Thursday’s close, the S&P 500 has gained more than 30% from its virus low.
Siegel, a longtime stock market bull, said he believes the only way the stock market could retest the March 23 bottom is if there were a more severe coronavirus outbreak in the fall and full-scale lockdowns have to be implemented once again, CNBC explained.
“I don’t think that’s going to happen. I think that’s a low-probability event,” he said.
To be sure, U.S. stock markets surged on Friday after data showed the economy lost fewer jobs in April than feared due to the coronavirus crisis, adding to optimism from an easing in tensions between Washington and Beijing.
All the 11 S&P sectors were trading higher, with the defensive real estate and consumer staples indexes posting some of the biggest gains.
Official figures showed nonfarm payrolls plummeted 20.5 million in April - their steepest plunge since the Great Depression - but the number was still better than the 22 million forecast by economists polled by Reuters.
"There were whispers that the number could come in much worse," said Darrell Cronk, chief investment officer at Wells Fargo Wealth & Investment Management in New York.
"The fact they didn't come in higher is a bit of a relief rally. The market is exhaling a little bit on the fact that the worst jobs report in modern history wasn't even worse."
The Nasdaq also has recouped all its losses for 2020, as investors pinned their hopes on supply chains coming back on track and a revival in consumer spending after several U.S. states reopened economies.
On Thursday, financial markets began pricing in a negative U.S. interest rate environment for the first time ever, expecting the Federal Reserve to pump even more cash into the system to rescue the economy from a deep global recession.
Wall Street's fear gauge slipped to its lowest since early March, consistently easing from levels last seen during the global financial crisis.
"The disconnect between sanguine financial markets and an imploding real economy grows larger by the day as bets for more and more stimulus are leading Wall Street to turn a blind eye to how catastrophic economic data really are," said Marios Hadjikyriacos, investment analyst at online broker XM.
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