Wharton professor Jeremy Siegel lays out why a record-high stock market in 2020 remains 'a real possibility'

• The stock market can still set records in 2020 thanks to fresh risk-on attitude and the Federal Reserve's stimulus, the Wharton finance professor Jeremy Siegel said on Tuesday.
• If a second wave of coronavirus cases is avoided, "it's even a likelihood" that indexes will tear higher through the year, Siegel told CNBC.
• The professor's comments arrived as markets rallied through Tuesday's session. The S&P 500 breached 3,000 for the first time since early March before closing just below the key level.
• Siegel said that while the market may be thriving, businesses not included in benchmark indexes were likely faring far worse amid mass unemployment and weakened consumer spending.
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The Wharton finance professor Jeremy Siegel still sees a scenario where the stock market breaches new highs before the year is out, despite reopening risks, historic unemployment, and a deep recession.

The Federal Reserve's multitrillion-dollar relief operations offer an unprecedented lift to the recently struggling market and should aid in a run-up through the rest of the year, he told CNBC on Tuesday. Couple the hefty stimulus with investors' growing appetite for long-term risk, and stocks could rally to fresh highs before 2021 as buying picks up, Siegel said.

"Believe it or not, it is a real possibility," he told CNBC. "Given no serious second wave, which could mean just effective therapeutics without even a universal vaccine, my feeling is it's even a likelihood that we will reach it."

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Siegel's comments arrived during a strong market upswing. Investors piled into equities throughout Tuesday as optimism about reopening efforts grew. The S&P 500 breached 3,000 for the first time since early March before closing just below the threshold.

The Wharton professor said the market's late-March low marked a floor for equity prices unless coronavirus outbreaks flare up again. Stocks' rally through lockdowns could prove too powerful, he added, as the larger firms included in major benchmarks likely performed better than smaller businesses.

"One of the unfortunate things about the lockdown is we've actually improved the prospects of the very companies in the stock market," Siegel said. "We've widened the gap between large and small, and between those people feeling the pain and those people that have their portfolios."

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One factor Siegel is less concerned about is the Fed's stepping back from emergency lending. Several market experts see a market correction on the horizon once the central bank unwinds its nine credit facilities and stops its backstopping of the credit market.

The professor expects the Fed's retreat to take place over a long period to ensure a steady recovery. As long as that cash remains in the financial system, the economy is likely to enjoy a brief bout of healthy inflation, he said.

"There's no way they're taking that back," Siegel said, "and as a result, that is all going to be flowing into the stock market and the economy."

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