‘The equity market is giving two or three months for [the market being] closed. … [I]f it goes longer than that, then that’s not going to be good.’
That’s Jeremy Siegel, a professor of finance at the University of Pennsylvania’s Wharton School of Business, expressing some optimism Monday about the outlook for a stock market that may be starting to reassert a bullish stance after a punishing month.
During a phone interview on CNBC, the professor said he thinks the stock market may have put in its bottom last week.
On Monday, the Dow Jones Industrial Average DJIA, -0.429% booked a more than 690-point gain, rising by 3.2% to end the session at 22,327, while the S&P 500 index SPX, -0.533% rose 3.4% to 2,626. The Dow and S&P 500 have risen in four of the past five sessions, but they are down considerably from their mid-February peaks. The Dow is off 24.45% from its Feb. 12 apex, while the S&P 500 is off 22.43% from its Feb. 19 peak, and the Nasdaq Composite Index COMP, -0.497% is 20.81% from its all-time closing high.
Check out: Stock market won’t hit coronavirus lows until these 3 criteria are met, says Goldman Sachs
Siegel says there are four things he will be watching to determine the staying power of this current run-up in stocks, which have seen the Nasdaq gain 15.1% from a March 23 low, the Dow gain 20.13% and the S&P 500 rise 17.6%:
- Fiscal and monetary stimulus (achieved, he says)
- Flattening the curve (progress is being made)
- Vaccines and therapeutics
- Deadlines for economic normalcy
On Friday, President Trump signed $2.28 trillion bipartisan stimulus package into law, aimed at aiding workers and businesses harmed by shutdowns related to the viral outbreak, while the Federal Reserve has already unleashed some of the most potent monetary-policy measures in its history to limit economic harm from the pandemic.
Siegel, however, says work needs to be done to achieve goals Nos. 2 through 4. He said, on the fourth point, that if the U.S. can create criteria which, if met, would permit reopenings of portions of the economy, that could go a long way toward helping investors plan for the future, without which they are mired in uncertainty.
Siegel said more testing should be done on using masks more pervasively to stanch the spread of the contagion.
Markets on Monday appeared to draw some optimism from President Trump’s decision to extend social-distancing guidelines to April 30 from April 12, suggesting that the president may be taking more seriously the rapid rate of infection in the U.S. from the disease that was first identified in Wuhan, China, in December and has infected about 770,000 people and killed nearly 37,000 worldwide, according to data aggregated by Johns Hopkins University. In the U.S., 157,000 people have contracted the illness. Trump on Sunday suggested that the market should be on its way to recovery by June.
Siegel garnered acclaim after he forecast that the Dow would reach 20,000 at the end of 2015. The index ended that year at 17,425.
This article originally appeared on Yahoo! Finance.
