A shortage of capital will fuel the markets. Lynn believes that one reason equities performed poorly during the past decade was the easy availability of capital from a variety of sources. During the last decade corporations didn’t need shareholders very much. Lynn reminds us that a stock market is just a place where firms go to raise money. But in the last decade, if you needed cash, you could get it from a bank, the bond market or a private equity firm.“In the coming decade, that will change,” comments Lynn. “Capital will be in far shorter supply.” The only place many companies will be able to raise money will be in the equity markets. The result? Companies will try to please their shareholders with steady dividends and a rising share price.

Moderate, persistent inflation in the 5 percent to 6 percent range. This helps equities. Why? Large multinational companies that dominate the main indexes can usually raise their prices along with the inflation rate. That helps profits. Also equities will be one of the few asset classes that can keep pace with inflation. Equities area good alternative to bonds hurt by inflation.

Economic growth in the new decade. “There are plenty of reasons to be optimistic,” says Lynn. “ As Zurich-based UBS AG said in a recent research note to investors, global population in the next three to four decades will grow by about 3 billion, mostly in the emerging markets where incomes and consumption are rising rapidly. That will act as a powerful spur to the global economy.” What’s more, expect more innovation that will drive technology and growth. With emerging nations producing more individuals capable of fueling technology, there will be more opportunities to invest in the market.