I am rereading the Grinold Kroner paper on the Equity Risk Premium to try to get a better handle on expected returns going forward… I couldn’t resist the irony of this bit here: “The business cycle is perceived to be under better control than in the 1920s and 1930s (very few investors think that another depression is likely in their lifetimes), making expected earnings smoother. All these factors make equity investing less risky, and contribute to the repricing [i.e. PE Expansion from 10 to about 30] that we saw over this 76-year period.” Rest of the 2002 paper is here, FYI: http://www.cfapubs.org/userimages/ContentEditor/1141674677679/equity_risk_premium.pdf