All the way down, stock market strategists have been upbeat.

But all of their rational arguments for a market recovery haven't tamed the bear: A year ago, many strategists were predicting the broad Standard & Poor's 500 Index would now be trading at about 1,500 points. Today, it's barely over 900.

Nonetheless, many strategists still believe the drop in the S&P, which is down 22 percent since March and now trades at 1997 levels, is an overreaction to pervasive concerns over terrorism and fears of more accounting scandals in corporate America.

"Most valuation approaches, such as thos-end 2001 target for the S&P of 1,550, but that forecast has dropped to 1,300 for this year as stocks have plunged.

Despite missing the mark, she remains steadfast in her rosy outlook, saying stocks are cheap because of the underlying health of U.S. business and the potential for a profit recovery.

Cohen and other bullish pundits say pessimists underestimate the benefits from the improving economy and its impact on profits. Even Morgan Stanley's Barton Biggs, who has generally been more cautious than his counterparts at other firms, has joined the chorus. On Thursday, he declared "as stock prices decline, I become more bullish."

Pessimism has gone overboard, Cohen said, and a misguided distrust of stocks is prevalent among money managers.

"The main impediment to rising share prices appears to be risk aversion; managers may attempt to minimize career risk by waiting for prices to rise before they buy stocks," Cohen wrote.

Of course, money managers might retort that, even if strategists provide thoughtful commentary, they have no monopoly of wisdom over the market's direction.

For instance, UBS Warburg's Ed Kerschner, a well-regarded bull, last year had a target of 1,835 for the S&P's close this year, roughly twice current trading levels. UBS Warburg went so far as to promote his forecast with full-page ads last August.

"Thankfully, our forecasting performance has not been so embarrassing lately," Kerschner wrote in a July 1 client note, discussing the profit predictions that underpinned his wrong call on stocks.

WHITE HAT, BLACK HAT

Because investors are so focused on the negative factors they are overlooking positive forces that will cause stocks to rise, said Al Goldman, A.G. Edward's chief market strategist. That's left investors with a "white hat, black hat" view of the world.

"The guys wearing white hats are (seeing) a slow but steady economic recovery, a rebound in corporate earnings that should show up clearly in the third and fourth quarters, a very accommodating Fed that will stay that way ... no inflation problem," he said.

For now, investor confidence is "somewhat lower than whale droppings at the bottom of the deep blue sea," Goldman said.

As it improves, stocks should rise from their current level of 16 or 17 times S&P 500 expected earnings to about 20, Goldman said.

Last year, Goldman had a 1,450 target for the S&P. This year, his target has dropped to 1,275.

Ironically, some of the attraction of the gloomy market is in fact its gloom: stocks have fared so poorly compared with another top investment choice, bonds, that strategists find it hard to believe the bad showing will continue much longer.

Stocks have underperformed bonds by 53 percent from the March 2000 peak, far worse than their relative return during the bear market of 1974 or crash of 1987, Lehman Brother's Jeff Applegate told clients on Thursday. The only prior periods when stocks fared worse were 1937-42 and 1929-32, he said.

"Certainly the world in 2002 has its challenges. But are the risks we face greater than those at the depths of the Depression? Or the dark early days of World War II? We think not," Applegate wrote earlier this month.

Like Goldman, Applegate had an S&P target of 1,450 last year; this year, his target also dropped, to 1,200.

While stocks look attractive relative to bonds, they lack a "catalyst," or trigger, to cause them to rise higher, according to CIBC World Markets' Subodh Kumar. Such a catalyst will be improved earnings, helped by the increased capital spending of companies eager to improve efficiency, he said.

With fears over terror, the drop in the dollar and the prevalence of accounting misdeeds overdone, investors now have a wonderful chance to buy stocks on the cheap, Kumar said.

CASH'S ALLURE

Not all Wall Street sages are so sanguine. Merrill Lynch's Richard Bernstein is unimpressed by stocks even at their new lows. Most recently, he cautioned that various indicators of corporate profit -- on which many observers have pinned their hopes for rebound -- have worsened.

Merrill last year had an S&P target of 1,570. Bernstein, who became the bank's top guru late last year, at the beginning of July cut his S&P 1,200 target to 1,050.

Market sentiment has yet to reach "capitulation" -- the much-touted moment of despair when investors abandon all hope and indices hit true bottom, Bernstein warned.

"We remain somewhat amazed that investors refuse to seriously consider cash as an investment," he wrote on July 1. "After all, a measly 1.7 percent return from Three-Month T-Bills is still a better return than the negative returns stocks have been providing."