Should investors be grabbing the bull by the horns?
by Jake SimmsPosted in: In this week's e-newletter, Investing Trends, Latest News & Views
We know that most stocks were overvalued before the 2008 crash. So just how undervalued are stocks today?
Maybe by as much as 30%, says Wharton professor and WisdomTree Investments senior advisor Jeremy Siegel.
“Stocks are 25% to 30% below what I’d call ‘fair market value’ and that might be conservative in terms of earnings power and relative interest rates. Even if we have a recession, I think this is a cheap market,” says Siegel.
While many financial analysts predict another market crash, optimists like Siegel may have history on their side.
Case in point: The Daily Wealth finds a consistent correlation between the Chicago stock exchange’s Volatility Index (VIX) – basically a measure of investor fear – and stock values.
From the mid 1980s on, when the VIX spikes, stock values jump within three months. How high?
The VIX hit 44 at the end of August. Looking over the over past 25 years, stocks increased in value by a whopping 80% just three months after the VIX hovered around 44.
You know the old adage, “Buy low.” If history and the VIX are indicators, the next couple of months may be a prime opportunity.
Are you bullish or bearish on the stock market right now? Let us know about it below.
Tags: chicago stock exchange, daily wealth, daily wealth newsletter, Dr. Steve Sjuggerud, jeremy siegel, recession, steve sjuggerud, stock market, stocks, vix, volatility index, wisdom tree, wisdomtree investments
September 8th, 2011 at 4:16 pm
Really Jeremy? 25% undervalued? When have you ever said they were expensive? Maybe you should check with GMO who has been right and they are showing most stocks overvalued except for emerging markets. They have been right for the last decade, you sir, have been so so wrong.
November 3rd, 2011 at 2:07 pm
[...] S&P 500 shot up nearly 14% in October – the highest monthly gain since 1974. (This site and others wondered if stocks weren’t undervalued a couple of months [...]
December 28th, 2011 at 7:11 am
[...] 1. Should investors be grabbing the bull by the horns? [...]
February 22nd, 2012 at 7:02 am
[...] critics scoffed when market-watcher Jeremy Siegel declared stocks were undervalued by as much as 30% back last September. So far it looks like he may have [...]