And that's the hitch. During the '90s, profits grew at a 12 percent annual clip, 50 percent higher than the historical 8 percent average. At the same time, sales were growing at 5 percent. How did companies manage to boost profits more than twice as high as sales? Through major cost cutting and technology--and aggressive accounting practices from time to time. But now "after 10 years of cost cutting, corporate America is lean and mean," says Paulsen. And with their stock prices faltering, companies are less able to make acquisitions that could fatten profit margins. So earnings growth will depend on sales growth, which looks to be in the low single digits. Put it all together and you get a bull market generating blah single-digit returns. That sounds right to George Mairs, manager of the Mairs and Power Growth fund. "Like in the '70s, you can't rely on the broad market to provide double-digit returns in the years immediately ahead of us," he says.

Back and forth. All this dour news doesn't necessarily mean that stocks won't budge from current levels. Even in the '70s, the early-decade bear market was followed by two minibulls. Yet overall, there wasn't a whole lot of progress. This time, predicts Shelby Davis of Davis Advisers, the Dow could trade between 10,000 and as high as 15,000. A 50 percent gain might sound like a pretty solid advance until you recall that the past two bull markets posted cumulative gains of over 400 percent.

The good news: Individual investors seem to be getting their expectations back in line. A recent poll of 401(k) participants by the Vanguard Group found that investors expected just a 6 percent average annual return over the near term. That's how 401(k) investor Jim Roeschlein of Elmhurst, Ill., sees things. "I think the market could be up maybe 7 percent over the next 10 years or so," says Roeschlein, a 40-year-old network analyst for a local hospital. He particularly worries that terrorist threats will continue to hold down investor confidence and the market. As for the battered Nasdaq? "I don't think it gets back to 5000 ever--well, maybe in 20 years or something." A long-term investor saving for two kids'college educations and retirement for himself and his wife, JoAnn, Roeschlein prefers balanced investments, like the Freedom funds from Fidelity.

A balanced approach means keeping nearly as much money in bonds as in stocks, compared with the 60 percent to 80 percent equity tilt recommended for long-term investors. Though playing it more even-steven would have crimped returns during the past two decades, that balance might be the way to go in this new market environment. During the '70s, bonds gained 71 percent, compared with 77 percent for the S&P 500. Legg Mason market researcher Barry Webb notes that since the 1920s, bond returns have been 2 percentage points less than the S&P 500 in periods when the S&P gains less than 10 percent a year. Bonds are also less volatile than stocks, which would be a pleasant change of pace for many investors. Among Morningstar's top-rated bond funds are UBS Pace Government Securities Fixed-Income P and Smith Barney Government Securities Y. One twist on buying long-term bonds is to look for funds that buy shorter-term mortgage-backed and corporate bonds. The former do well when rates are relatively stable, while the latter excel as the economy emerges from recession, says Mark Kiesel of Pimco, whose firm's Total Return portfolio is one fund making such a bet.

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