Wharton School professor Jeremy Siegel predicted the stock market is likely primed for strong gains next year, regardless of who wins the presidential election.
“I think the chances are this bull market can continue in the next year, just on those factors,” Siegel told CNBC. “I think the market ... is looking forward to a really good 2021 no matter who is president,” he said.
Siegel said the “tremendous burst of liquidity” from the Federal Reserve and Congress pumping trillions into the economy should fortify the stock market’s ability to build off its recovery from coronavirus lows.
“I’m a monetary theorist. This is what I teach and study. This is unprecedented in 75 years, since World War II,” he said. “I think there’s a lot of repressed liquidity in the market that once the vaccine and the pandemic fears fade in 2021, we’re going to see a big boost in activity.”
Siegel also thinks corporate profits could be boosted by an increase in worker productivity stemming from the pandemic. “Ffirms have shed down unneeded individuals, unproductive individuals, cut expenses,” he said.
“It’s hard for me to see, without a stimulus package and with that election uncertainty, for there to be a lot of progress between now and the first week of November,” Siegel said. “I think that uncertainty is going to continue to weigh onto the markets.”
Meanwhile, Goldman Sachs Group Inc. recently said that traders should temper their fears that a delayed U.S. election result could upend markets.
While a delayed outcome is a “tail risk,” a combination of early results, voter turnout, county-level data and the high correlation of polling errors across states suggests investors will have enough information on election night to determine the likely victor, wrote economists Michael Cahill and Alec Phillips in a recent note. A number of states -- including some key battlegrounds -- allow votes to be processed and counted well before election day, they noted, Bloomberg reported.
“It seems fairly likely that there should be enough information on election night from states that will report results quickly for the market to be able to gauge the likely winner,” the pair wrote. “In other words, the S&P can trade the likely outcome, even if the AP does not call the race.”
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