Where is the stock market headed?

Given that stock prices have been up the last few months, it's easy to assume they'll continue in that direction for the foreseeable future. But some of the folks looking out the windshield see lower-than-expected performance over the next 10 years, particularly if inflation rises.

I've mentioned the weekly newsletter of John Mauldin here before in Should we worry about inflation?

In addition to his regular weekly newsletter, Mauldin publishes a weekly Outside the Box letter that has comments from other investment strategists. This week's article is by Ed Easterling, author of Unexpected Returns: Understanding Secular Stock Market Cycles and President of an investment management firm.

In the article, Beyond The Horizon: Economics & EPS, Easterling uses the stock market's historical earnings per share (EPS) and price to earnings ratios (PE), along with different inflation scenarios, to predict a range of performance for the stock market over the next 10 years.

A lot depends on future inflation rates, but if they're high, Easterling's analysis indicates that Series I Savings Bonds would outperform stocks over the next 10 years.