The Tell: Wharton finance professor says an index of mom-and-pop businesses ‘would show devastation far worse than what we saw in the stock market’

‘If investors tried to come up with an index of mom-and-pop businesses, it would show devastation far worse than what we saw in the stock market, and it would still be down dramatically today,”

That is from Jeremy Siegel, professor of finance at the University of Pennsylvania’s Wharton School of Business, in an interview with MarketWatch on Tuesday, who says the damage to small businesses is not showing up in financial markets.

He says the U.S. stock market’s impressive recovery from the March rout doesn’t reflect the broader pain in the economy, as the S&P 500’s rally has come on the back of a few high-flying technology companies while small businesses and minorities took the brunt of the damage in this recession. Like other analysts, Siegel worried about the wide disconnect between Wall Street and Main Street, amid sky-high unemployment and mass business closures.

“Arguably, the support for small businesses is unprecedented in our history. But some small businesses are going to be closed unless we get much more payroll protection. There needs to be much more help to businesses that don’t have access to public markets,” said the prominent market pundit and a senior adviser to WisdomTree Investments.

His comments came before Trump signed a bill overhauling the Paycheck Protection Program on Friday, loosening some of its restrictions and allowing more business owners to apply for loan forgiveness.

Main Street could be on the path to recovery, if the latest economic data turns out to be a lasting trend. Friday’s employment report for May showed the U.S. added 2.5 million jobs in May, up from the 20.7 million jobs last month. That is a remarkable figure in itself but came against anticipation of a loss of 8 million or 9 million jobs on the month.

The professor says the longer-term economic impact of the COVID-19 pandemic and the behavioral changes it will bring about in consumers are what will ultimately command the attention of investors, and not much else. Siegel is known for predicting that the Dow Jones Industrial Average DJIA, +3.12% would see 20,000 at the end of 2015.

“COVID has the most direct effect on the economy, far greater than the unrest,” he said.

As long as the reopening of businesses stays on track, equities will keep rising and look past the national protests over police brutality breaking out across the country. The intensity of those protests, which saw peaceful demonstrations along side rioting and looting, have subsided considerably in recent days, but the fallout from racial tensions following the death of unarmed black man, George Floyd, at the hand of a white police officer are reverberating throughout America.

See: Amid disease, riots and rising U.S.-China tensions, the stock market keeps it cool

Still, U.S. stocks have followed Siegel’s bullish expectations this week and notably on Friday. The S&P 500 SPX, +2.64% and Dow both rose sharply on Friday, while the Nasdaq Composite COMP, +2.09% set a new intraday record.

Perhaps it’s no surprise that the sage of long-term investing says stockholders should look past the civil unrest roiling the country.

“The stock market is a forward looking mechanism the value of stocks depends not on the earnings of one year,” said Siegel.

He said less than 10% of a stock’s price was attributable to earnings over the next 12 months, meaning any short-term geopolitical turmoil was unlikely to derail the stock market’s ascent over an extended horizon. As long as earnings returned to normal in the distant future, equities were likely to keep trucking on.

“That is one of the major reasons the stock market should not experience a sustained sharp drop,” he said.

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