Stock guru Jeremy Siegel, a finance professor at the University of Pennsylvania, thinks the stock market is near a bottom, despite its recent plunge.
The Dow Jones Industrial Average dropped 4.4 percent Monday to a two-year low of 10,918, and many experts expect further trouble ahead.
But this very bearishness represents a bullish signal, Siegel tells Bloomberg. "There are a number of indicators one can use," he says.
"One is investor sentiment. That's a contrary indicator. The more bearish investors and newsletters are, the more likely we are to have hit bottom."
Siegel has created an indicator based on data from research firm Investors Intelligence. "My indicator shows that bullishness recently dropped just below 50 percent, hitting an 18-year low," he says.
"Everyone is bearish, sold out. The indicator is lower than October 2002, when we just finished a 50 percent" decline in stocks.
Siegel acknowledges that he can't be sure the stock market has reached its nadir. "Anyone who can confidently predict mark bottoms or tops would probably be as rich as Warren Buffett," he says.
"It's an inexact science. You look at certain indicators, but nothing works 100 percent of the time."
Still, with commodity prices having slipped since July 15, and the dollar having gained, all signs point to good times ahead for stocks, Siegel says.
"I would say we're very near the lows. We might go down another few percent, but I think longer-term investors will be rewarded at these levels."
But other experts are more cautious. "This past year has been a slow death for anybody who has bought stocks," Michael O'Rourke, chief market strategist for brokerage firm BTIG LLC, tells The Wall Street Journal.
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