The stock market has been exhibiting classic bullish behavior and isn't fragile and rising on hope alone, Jeremy Siegel said Monday.
The market shows underlying buying power, and the selloff on the Iran war's initial shock followed by stronger rebounds on de-escalation hints indicates a classic bull market, the Wharton School and WisdomTree economist wrote in his weekly commentary. "And it tells me the path of least resistance remains higher."
Easing war fears removes the biggest immediate downside tail risk, "but the bigger story is that liquidity remains strong, the economy continues to avoid recession, and the market is acting like it wants to move higher," Siegel wrote.
"I would stay constructive on equities, while recognizing that a further retreat in oil could also improve the case for value and cyclicals. This is still a bullish market, not because all the risks are gone, but because the fundamental buying power underneath it remains very much intact," he said.
Even with the worst of the energy shock apparently past, however, "we are not going back to the pre-war energy regime," Siegel said, noting that oil futures for April 2027 suggest prices around $70 a barrel, versus roughly $55 to $60 before the conflict.
"In the best scenario, gasoline could settle into the $3.40 to $3.50 range rather than the $4.10 area, still above the pre-war $2.90 to $3.00 range. That matters for consumers, but it is not enough to derail the expansion," Siegel wrote.
He called the consumer hit manageable given support from tax relief and nominal income growth.
Consumer sentiment levels, however, are "terrible" and a bearish sign, according to Siegel.
Nonetheless, easing geopolitical stress, firmer fiscal spending and strong money growth powerfully support equities, he wrote.
"It also helps explain why the rebound has been led so forcefully by large-cap growth and the MAG 7, which operate independently from oil, though a continued decline in oil would broaden the rally and help value shares as well," he said.
Credit: Lila Photo for TD Ameritrade Institutional
© Arc, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to TMSalesOperations@arc-network.com. For more information visit Asset & Logo Licensing.