How to survive a potential 'lost decade' in stocks, according to an investor whose firm thrived in the S&P 500's last drought

• Some on Wall Street have warned of a "lost decade" ahead for stocks.
• Yacktman Asset Management thrived during the decade of tepid returns from 2000 to 2010.
• The firm's president said it focuses on which companies' free cash flows hold up in recessions.

From the peak of the dot-com bubble in March 2000 through March 2010, the S&P 500 was down 24% — a crippling stretch of returns that money managers cite as a prime example of a "lost decade" for markets.

Some on Wall Street seem to think another decadelong drought could be coming. Warnings of anemic returns ahead for the S&P 500 from top forecasters, including Goldman Sachs' David Kostin, Bank of America's Savita Subramanian, and Morgan Stanley's Mike Wilson, have emerged over the last couple of years.

The key driver of their arguments is that starting valuations are historically high. The Shiller PE ratio, which has had a strong track record as a predictor for 10-year subsequent returns, is currently near levels last seen in 2021 and 2000.

Valuations aren't great for projecting near-term returns, but plenty of near-term downside catalysts have emerged in 2026, such as the Iran war, AI disruption, and a weak February jobs report.

For Molly Pieroni, the president of Yacktman Asset Management, which oversees $12 billion in assets, it's impossible to know what the market will do — but there's a compelling argument to be made that stocks are going to have a lackluster stretch ahead.

"With the major indices being, you know, mid-20s return for the last three years in a row, and primarily through multiple expansion in terms of the foundations for those returns, we think returns have been pulled very far forward," she told Business Insider.

Pieroni has experience navigating lost decades. The concept is at the heart of her firm's investment philosophy, which emphasizes downside risk.

Yacktman's track record during down markets stretches back to the S&P 500's 2000-2010 stretch, during which the AMG Yacktman Fund (YACKX) was up about 102%. The fund was coming off a rough patch during the final few years of the dot-com craze from 1997 to 2000, but right when the broader market started to underperform, YACKX began an impressive run.

The fund also performed exceptionally well coming out of the financial crisis lows in 2009. It surged by 100% over 13 months from March 2009, almost doubling the S&P 500's return.

Yacktman's investing strategy

The firm's outperformance during difficult periods comes down to a few things. One is its focus on stocks' normalized free cash flow levels, Pieroni said. It wants to see how its cash flows behave during recessionary periods. They're usually safe bets, but it's a way to protect capital when things get rocky, she said.

"When we look at a company, we're looking back into what happened in '07, what happened in '08, '09, what happened in 2000, 2001, and as far back as Factset will let you," she said.

"You know how in the bond market, if you have a AAA kind of not risky name, you get a lower yield on it?" Pieroni continued. "We do the same thing, where we're happy to hold some sort of AAA-type of names in the portfolio, but we don't expect as much out of those as we do for higher risk kind of companies."

A couple of other crucial factors her firm looks for are low levels of leverage and reasonable valuations.

This approach can lead to underperformance when investors broadly take a risk-on approach. Yet, when a risk-off mood sweeps the market, Pieroni's firm begins to reap the benefits and becomes more active. As the defensive stocks the firm owns start to surge as investors pay a premium for safety, it then trims its positions and moves into underappreciated areas of the market.

"It's kind of when we do our best work, when it's topsy-turvy," she said.

Recently, the firm has added to some software industry stocks following their sell-off earlier this year. Pieroni couldn't share the stocks yet for compliance reasons, but its top five holdings as of December 31, 2025, include: Samsung (9.09%); Bollore (7.36%); Canadian Natural Resources (4.91%); Microsoft (4.15%); and Hyundai (3.76%).