SAN DIEGO – After a difficult three years, advisors have a lot to be optimistic about.

“This has been a stealth bull market,” said Jeremy Siegel, professor of finance at the Wharton School of the University of Pennsylvania, in his luncheon keynote presentation at the TD Ameritrade Institutional national conference in San Diego, California on Thursday.

Siegel’s staunch optimism is backed by data. Yes, the Standard and Poor’s 500 has declined 15% from its high. But the bounceback from the market has been really strong, he explained. Over the long-term, from 1802-2010, real returns in the stock market have remained at 6.7%. “There are a lot of decades when it won’t be there,” he said. “Some years will be better and some will be worse.”

Siegel said that although many point out how badly this past decade has been, looking at the last twenty years the real return on the stock market is the same as the long-term average of 6.7% per year.

“There are good decades and bad decades,” he said. Yet when compared to bonds, with a return of 1.8% from 1946-2010, returns on equities look phenomenal.

Siegel believes there is a great American bond bubble. Yields declined until early October and have been rising ever since, he said. “The bond bubble is beginning to burst,” he said. “It’s similar to the bubble in technology.”

Meanwhile, the U.S. just came out of the biggest bear market since the Great Depression.

But Siegel is extraordinarily bullish, anticipating 2011 earnings for the S&P 500 will increase 95.46 points to 1257. The record increase over 12 months is 91.47 points in the 12 months ending June 2007, he said.

The big question, Siegel explained: Where can you get yield in a world of near zero interest rates? His answer: Dividend paying stocks. “This market is not overvalued at all. It is not at all too expensive. And it’s not too late.”

Ten-year municipal bonds  have been hurt more than they should be, he said.

This last recession is the second since 2000, a rarity. But the good news is that coming out of the downturn there should be a bull market. “We are still 20% above the long term trend,” he said.

The challenge will be the current huge deficit of $1.5 trillion, with almost $1 trillion of it due to the recession. That still leaves a chunk of the deficit, which Seigel says is manageable. The unmanageable part, he says, is due to Medicare and other long-term entitlements: “Looking 5, 10, 15, or 20 years out if we don’t get a grip on those entitlements we will suffer even more.”