Economist Jeremy Siegel, who made himself famous in the 1990s by extolling the virtues of stocks as long-term investments, is sticking to his story.
The title of his 1994 book, “Stocks for the Long Run,” still holds, the University of Pennsylvania professor writes in the Financial Times.
“The recent bear market has been particularly painful for stock investors,” Siegel acknowledges.
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During the decade through December, U.S. stocks produced a negative real return of 3.15 percent. That was the fourth worst 10-year period since 1871.
“This had led many to question whether the mantra ‘Stocks for the Long Run,’ is still right for investors,” Siegel wrote.
History says yes, he argues. The three decades when stocks suffered their worst were followed by very strong decades.
World economic growth will buoy U.S. stocks, Siegel maintains.
“S&P 500 companies now obtain almost 50 per cent of their revenue outside the United States, and that share will most certainly rise, as growth in the emerging nations continues to outpace that of the developed world.”
In addition, stocks are attractive on a price-earnings basis, Siegel says.
The S&P 500 index now trades at 14 times projected 2010 operating earnings, up from an average of 18-20 since 1955.
Not everyone is so hot on stocks. Investment guru Bill Gross told CNBC, “We think the market. . . is due for a pullback or setback, only because it's gone so far and economic growth cannot go so far."
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