“The economy is getting better and there are signs that earnings are about to improve. So why can’t the stock market get going again?” writes E.S. Browning in today’s Wall Street Journal.

“The answer goes well beyond Osama bin Laden and Arthur Andersen. It lies in a fundamental shift in recent years that has made the world a less-attractive place for investors, as a startling number of the market’s underpinnings have fallen away. As a result, many professional investors are warning that stocks aren’t going to perform the way they did in the late 1990s — and may not for years to come.”

“Consider how many of the essential factors that drove the bull market have changed. Then, with the Cold War over, money flowed easily from country to country and little challenged the American capitalist model. Inflation fell to unheard-of lows. Falling interest rates spurred business and home ownership and helped send stocks to dazzling highs. Creativity was high, too, as technology revolutionized the way people lived. Across the world, people wanted to own U.S. stocks.”

“Some of those factors, of course, remain in place, but a surprising number don’t — making it very difficult to muster arguments as to why anybody needs to buy stocks now.”

“Many people, especially in New York, find their minds focused on a new war against terrorism, which seems to be here to stay. Economists who recently were forecasting government surpluses now warn of deficits that could last for years. Communications and the Internet still are enhancing productivity, but companies simply don’t need to boost their purchases of tech gear as fast as they did. The dollar now is weakening and foreigners are pulling back from U.S. stocks.”

“If companies start reporting stronger earnings, of course, some of the upbeat thinking could return. But for now, the overriding sense of hope that drove stocks in the 1990s is fading — partly as a result of doubts about the validity of corporate numbers — and many long-time investors doubt that it will come back the way it was.”

” ‘Investment psychology has changed dramatically over the past couple of years, and that will tend to limit the upside’ for the stock market, says Bruce Simon, chief investment officer at money-management firm Glenmede Trust in Philadelphia. ‘It is going to foster a pretty fundamental change in the way investors approach the markets,’ he says. ‘We need to condition ourselves and our clients for fairly unimpressive single-digit returns over the next decade.’ “

“These professional investors aren’t forecasting a renewed bear market. But they are signaling that the top performers to come might not be the behemoths that seemed so invincible in the past. Some of the best stocks could be those that were largely ignored in the 1990s: foreign stocks, or stocks of small companies that make boring things like cement and wallboard.”