As investors make the flight to safety, are they missing a golden opportunity in stocks? Jeremy Siegel, a professor of finance at Wharton, shares his view.
Siegel frames his case that stock is a golden opportunity now from historical perspective. Back in March 2000, after a 20-year bull market, stocks were in a bubble. But from 2000 to 2010, stocks went from overvalued to extremely undervalued, in relationship to earnings and extremely low Treasury rate.
One phenomena makes Siegel think stocks will do well in the next decade is the high dividends rate in the blue chip stocks. Nowadays it is possible to find the dividend yields in Dow Jones Industrial Index or S&P 500 stocks as high as 3, 4, 5, or even 6%. It has been 50 years since last time we saw that dividends so rich against the long term Treasury bond rate.
Siegel acknowledge that some of the unemployment is structural in nature, but he thinks over time the unemployment rate will drop to a more tolerable rate of 6-7%. Given the generous unemployment benefits, it is hard to get down to the pre-crisis low of 4 to 5%.
Siegel thinks stocks has reacted the least to the QE2, so if Fed ever disappoint the markets in the QE2 size that it is going to implement, stocks will be least spooked compared to bond and gold.
Siegel frames his case that stock is a golden opportunity now from historical perspective. Back in March 2000, after a 20-year bull market, stocks were in a bubble. But from 2000 to 2010, stocks went from overvalued to extremely undervalued, in relationship to earnings and extremely low Treasury rate.
One phenomena makes Siegel think stocks will do well in the next decade is the high dividends rate in the blue chip stocks. Nowadays it is possible to find the dividend yields in Dow Jones Industrial Index or S&P 500 stocks as high as 3, 4, 5, or even 6%. It has been 50 years since last time we saw that dividends so rich against the long term Treasury bond rate.
Siegel acknowledge that some of the unemployment is structural in nature, but he thinks over time the unemployment rate will drop to a more tolerable rate of 6-7%. Given the generous unemployment benefits, it is hard to get down to the pre-crisis low of 4 to 5%.
Siegel thinks stocks has reacted the least to the QE2, so if Fed ever disappoint the markets in the QE2 size that it is going to implement, stocks will be least spooked compared to bond and gold.
