‘One of the buying opportunities of a lifetime’: Here’s why Wharton professor Jeremy Siegel thinks the coronavirus-driven stock rout is laying the foundation for a massive bounce back
- Jeremy Siegel, professor of finance at the Wharton School, says the coronavirus-induced stock selloff could present a buying opportunity of a lifetime.
- He notes the strength of the US economy prior to the market plunge, and thinks that if our market follow China’s (who he says have completely recovered) a sharp reversal may be in order.
- Siegel says “fear will continue to drive this” in the short-term.
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Still, with coronavirus fears widespread, financial pundits calling for a global recession, and entire economies in lockdown, not all are looking at markets as persona non grata. After all, Warren Buffett — arguably the world’s most famous investor — one famously declared: “Be fearful when others are greedy. Be greedy when others are fearful.”
Jeremy Siegel, professor of finance at the Wharton School of the University of Pennsylvania, sees the investment glass as half-full. But he thinks it’s going to take time to materialize.
“Fear will continue to drive this,” he said on the “Behind the Markets” podcast. “We may not have seen the lows on stock prices.”
He continued: “So we are going to have a downturn, but the economy is standing on a very strong basis going into that downturn.”
Siegel cites the strength of February’s nonfarm payrolls report as fodder for his thesis, a report that showed unemployment in the US near historic lows. He’s also quick to add that China — where the coronavirus originated — is starting to get a handle on things.
“One very interesting fact — which even surprised me — China is getting its epidemic well under control,” he said. “The Shanghai Composite, which is the most popular Chinese stock index, is now higher than it was last November before they ever even recorded their first virus case.”
He added: “One should keep that in mind when one thinks about longer-term implications of the coronavirus.”
Siegel says the actions that the Chinese have taken to suppress the virus’ spread — quarantines, social distancing measures, and canceled sporting events, to name a few — are showing signs of success. As the US prepares to follow suit, he wouldn’t be surprised to see our markets follow a similar trajectory.
“Their markets have totally bounced back,” Siegel said. “There’s definitely signs of stabilization there.”
Although Siegel thinks the US dropped the ball as far as a lack of testing equipment and support for workers who have been displaced is concerned, he still thinks the foundation is in place for a speedy recovery.
“Fear might drive it down, but then you’re going to have one of the buying opportunities of a lifetime, or certainly of the decade to say the least,” he concluded. “As much chaos as there may be this year — and yes, there might be a recession … a number of experts say it’s 50/50 — earnings could be off 20%, 30%, but if they bounce back in 2021 we should see a great recover. We should not see anymore significant declines.”