For the U.S. stock market, the past ten years have earned the title "the lost decade." The next ten years probably will not be much different: The market will likely set record highs and multiyear lows, but index investors and buy-and-hold stock collectors will find themselves not far from where they started. We are in a Cowardly Lion market, whose occasional bursts of bravery are ultimately overrun by fear that leads to a subsequent decline.

Every long-lasting bull market of the past two centuries (and we had a supersized one from 1982 to 2000) was followed by a sideways market that lasted about 15 years. The Great Depression was the only exception. Despite common perception, secular markets spend a lot of time in bull or sideways phases, and roughly an equal amount in each. They visit the bear cage only on very rare occasions.

This doesn’t happen because the market gods want to play a practical joke but because stock prices are driven in the long run by two factors: earnings growth (or decline) and price-earnings expansion (or contraction). Though economic fluctuations are responsible for short-term market volatility, long-term market cycles are either bull or sideways if the economy is growing at a close to average rate.