Fund manager John Hussman says the broader market is priced to return significantly less than its historical average for the next decade — and says the government’s huge bailout of financial firms was not, as many believe, the reason the U.S. avoided a redux of the Great Depression.

In his latest commentary, Hussman lists 12 “Things I Believe”. Among them: “Based on a variety of valuation methods that have a strong historical correlation with subsequent long-term market returns, we estimate that the S&P 500 is presently priced to achieve a total return averaging just 3.6% annually over the coming decade.” But Hussman adds that stocks were more overvalued at the 2007 peak and in 2000 than they are today. “The current overvalued, overbought, overbullish, rising yields combination compounds the headwinds for the market here, but nothing is certain, and we can’t rule out further speculation on hopes of ever larger government distortions,” he says.

Hussman also says the bank bailout is wrongly viewed as having saved the U.S. from financial doom. “In short, the downturn in the real economy occurred because regulators refused to take receivership of insolvent institutions, while pushing a story line that the entire global economy would crumble if bondholders had to take losses,” he writes. “This created a fear among depositors and consumers that the entire system was arbitrary and unstable, fueled periodic runs on various financial institutions, tightened the availability of credit to companies having nothing to do with real estate, and created a self-fulfilling prophecy of global economic weakness.”

Hussman says policymakers should have protected despositors and consumers, but allowed bondholders to take their losses. “We could have simply had a ‘writeoff recession’ in paper assets, rather than an implosion of the real economy and an explosion in public debt,” he says.

Other things Hussman believes: “It will be harder to inflate our way out of the Federal debt than investors seem to believe”; “It will be harder to grow our way out of the Federal debt than investors seem to believe”; and “stocks are a poor inflation hedge until high and persistent inflation becomes fully priced into investor expectations. At the same time, short-dated money market debt has historically been a very effective inflation hedge.” But, despite his dour outlook, he says it won’t be impossible to make good money in the coming decade. “A long period of generally rising interest rates will not negate the ability of flexible investment strategies to achieve returns, provided that the increase in rates is not diagonal, and the strategy has the ability to vary its exposure to interest rate risk,” he says.