No, we are not heading into another lost decade

Interest rates are high. Valuations look stretched. Recession, wars, debt, trade tensions—everywhere you look, there’s anxiety. So it’s fair to ask: Is the market headed for another lost decade?

For most investors, the thought of spending ten years in a market that goes nowhere is unsettling. But it's entirely possible and has happened before multiple times. Certain eras in market history earned the nickname “lost decade” because stock prices failed to sustainably recover for 10 years or more. The most notable and often cited examples are:

• 1929: The Great Depression. Stocks crashed nearly 90%. It took WWII to revive the economy.
• 1970s: Sky-high inflation, oil shocks, and 20% interest rates. Stocks went nowhere for a decade.
• 2000–2010: The dot-com bubble burst, then the financial crisis hit. Markets didn’t recover for years.
• Japan (1989–Present): A popped asset bubble led to decades of stagnation—Japan’s market only just surpassed its 1989 high.

Lost decades usually share common traits: 1) overvalued markets, 2) too much debt, 3) major economic disruptions, 4) policy missteps, and 5) weak productivity.

So, how does today compare?

• Valuations? Elevated, but not dot-com crazy. Big Tech is actually wildly profitable.
• Inflation? Cooling and much more controlled —nothing like the runaway 1970s.
• Debt? Government debt is high, but households and corporates are healthier than in 2008.
• Demographics? Aging, but still younger and more dynamic than Japan.
• Geopolitics? Tense, but markets are absorbing it (so far).
• AI & tech? This might be the wild card. If AI boosts productivity like some expect, it could drive real growth and massive wealth creation—unlike past lost decades, which lacked this kind of engine.

There are risks. We might see lower returns ahead in the coming decade. But the world is not falling apart. This isn't the same setup as the 1970s or 2008.

So ignore the noise. A 10% correction isn’t the end of the world. Keep investing through the ups and downs in high quality companies for the long-term.