“Last week’s recovery in the Dow Jones Industrial Average, featuring a brief climb above 10000 on Thursday, helped spread a smattering of optimism in the stock market,” writes E.S. Browning in today’s Wall Street Journal.

“Maybe the economy is going to recover now. Maybe the doldrums are ending. Maybe stocks finally will make some progress after two straight years of losses.”

“But maybe not. History shows that both small and big investors alike may need to keep their expectations in check. While annual gains of 20% briefly became the norm during the gold-rush days of the 1990s, the market may now be settling back into a much more sober era — a time when 10% gains could start to look good.”

” ‘In a way, this is really a return to what is normal, after a long period that was abnormal,’ says money manager John Zielinski at Chicago banking group Northern Trust.”

“In the last five years of the 1990s, the Dow industrials gained on average more than 20% a year. Over a longer period, from 1982 through 1999, despite the crash of 1987, the industrials averaged more than 15% a year.”

“But when you measure stock performance over a longer period, the results are less spectacular.”

“From 1945 through the end of last year, a period that includes booms and busts, the annual gain for the Dow industrials was 8% to 9% a year, according to market-research firm Ned Davis Research in Venice, Fla. Including dividends, the gain was 12% to 13% a year.”

“Longer-term research by Prof. Jeremy Siegel of the University of Pennsylvania’s Wharton School and by Ibbotson Associates in Chicago suggests that stocks gain 9% to 11% a year, and that includes dividends. Where do you think the stock market is headed in the next six months? Participate in the Question of the Day.

To make things worse, after extended periods of above-average gains, as the market enjoyed for 18 years through 1999, stocks sometimes endure periods of below-average gains. From 1966 through 1981, the gain in the Dow industrials averaged less than 1% a year, not including dividends.”

“Little wonder then that the major indexes ran out of steam at the end of the 1990s, and seem to have trouble getting going now. Even with last week’s gains, the industrial average still is lower than it was on March 15, 1999. Although some groups of stocks have made progress, the major indexes have basically gone nowhere for about three years.”