7 Reasons why the stock market may under-perform for the next 10-20 years:
When major bull markets top out, long, bearish tails often follow (lasting 15-25 years).
Demographics: What happens to equity markets when 76 million baby-boomers begin to withdraw their money for retirement? Maybe the reverse of what happened in the 90's when boomers were buying into the market?
Trade and budget deficits: (Out of balance means unstable.) These are uncharted waters. Never has the US as the world's economic power taken on so much debt.
War and Terrorism: At best create uncertainty; at worst create human and infrastructure disasters.
Globalization: China, India & the squeeze on profits:
US Business has higher costs as international demand causes commodity prices to skyrocket.
US Business can't raise prices because of low cost competition from developing countries.
Emerging countries increase competition for investment capital. Higher demand for money means that cost for business (interest rates) go up, and that bond portfolios lose value. US budget deficit compounds also.
The Energy Crunch:Some say global oil production is near its peak, yet demand is accelerating. New sources or alternatives may be found, but how soon? At what price?
The paper vs. Stuff Cycles: It is the thesis that equity prices and raw materials prices alternate in opposed bull and bear cycles of roughly 15 - 20 years in length. If so, as of 2006, we could be 5 years into a bull cycle for commodities and a simultaneous bear cycle for equities.
EVEN IF THE STOCK MARKET GOES UP...
Alternative assets still make good sense, for diversification and to mitigate risk.
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Please remember that commodity trading involves a high degree of leverage. That leverage allows for large returns, but also large losses. Due to the high degree of risk involved in high leverage, you should carefully consider whether commodity trading is appropriate for you.
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