- Jeremy Siegel told CNBC on Friday the stock market’s record rally is sustainable and laid out three factors that will make 2021 a “very good year.”
- The Wharton professor of finance is eyeing record levels of liquidity, better-than-expected vaccine progress, and the outcome of the US election.
- Siegel is also forecasting that corporate earnings will beat expectations in 2021.
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While the Dow Jones took 18 years to jump from 10,000 to 20,000, it reached it’s next round-number milestone in less than four years, hitting 30,000 at the start of this week. But Wharton’s Jeremy Siegel said Friday that investors shouldn’t be concerned that it’s too much too soon for the stock market.
In a Friday CNBC interview, the professor of finance laid out three factors that have supported the market’s record-setting rally and will send stocks higher in 2021.
The first is the record amount of liquidity from investors that’s been held back by the coronavirus, Siegel said.
“I don’t just mean reserves added by the Federal Reserve, I mean the M1 money supply, up 44% since the beginning of March. We have not seen that since World War II,” Siegel said.
The second factor-better-than-expected vaccine progress-will enable lead investors to unleash pent up liquidity and increase spending next year as the economy reopens, he added.
Lastly, the outcome of the US election will help stocks in 2021, as a likely Republican-controlled Senate will put a cap on tax increases, while president-elect Joe Biden will avoid “some of the crazy trade policies” that President Trump pursued, the professor added.
“On all those three fronts, we have positive forces for the market that I think are going to cause 2021 to be a very good year,” he said.
Siegel also forecasted that earnings will beat expectations in 2021.
“I think we’re going to beat in 2021,” he said. “Normally earnings expectations go down as we progress through the year, but I actually think that we’re going to have a boom next year.”
“In a world of interest rates so low, you can’t beat stocks as an asset,” Siegel said.