Those investors who got spooked enough to exit the stock market before COVID-19 fear ramped up and started heavily impacting stock performance may have avoided major losses initially, but they are losing out now if they are still out of the market, according to Jeremy Siegel, professor of finance at Wharton and WisdomTree senior investment strategy advisor.
“As a longtime observer of markets … I have seen this pattern so often, where advisors of many sorts” — the “so-called ‘market gurus’ — told people” that they should “get out of the market,” he said Monday during his weekly conference call on the state of the markets.
“We should give them credit if early on they did make that call,” he conceded, noting that on March 6 “everything was moving as usual” and the “virus fear exploded the following week.”
“If you got out on that week before things got bad, you avoided a 20 to 25% drop” in the stock market, he noted.
“But if you did not get back in, you are behind” now, he said, adding: “I know a lot of people who got out and they’re still out. This is just such a pervasive lesson in the markets.”
Although he conceded that the market can indeed go down again, he cautioned: “Don’t count on it …. Believe it or not, this market can set all-time highs this year.”
The main reason why the Dow Jones Industrial Average was up 350 points Monday was because there was “absolutely no doubt that not only are the number of new cases [of COVID-19] slowing in the United States, but around the world in most places,” he said.
He pointed to a Bloomberg report Monday that said U.S. COVID-19 cases were up 2.3% since Sunday, the lowest increase so far in April, according to data compiled by Johns Hopkins University and Bloomberg.
“There’s a lot of room for optimism here, but there’s also a tremendous amount of caution” that is called for, he said, noting the second wave of the Spanish flu was deadlier than the first.
Siegel called the “unprecedented stimulus” steps taken by the U.S. government and Federal Reserve a “major reason” for the “recovery” seen in the stock market performance in recent weeks after the major declines seen in March.