Stocks May Rally as Valuations Cheap, Wharton’s Siegel Says

Stocks in the developed world and emerging markets may rally in coming years as they trade below historical valuations, said Jeremy Siegel, a professor of finance at the University of Pennsylvania’s Wharton School.

Price-to-earnings ratios in emerging markets are “extremely cheap,” while the Standard & Poor’s 500 Index normally trades at 19 times earnings in periods of low interest rates, which is about 40 percent above current levels, he said.

“We could have a bull year for the next two to three years with gains of 10 to 15 percent per year in the S&P 500,” he said today at a conference in Santiago. “Stocks are still below the long-term trend and there is still room for them to rally.”

Siegel recommends investing in stocks with high dividend payments.

“The top dividend payers of the S&P 500 are the type of stocks you want to hold if you are a conservative investor in the U.S.,” he said.

To contact the reporter on this story: Eduardo Thomson in Santiago at ethomson1@bloomberg.net

To contact the editor responsible for this story: James Attwood at jattwood3@bloomberg.net

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