With market volatility recently reaching its highest level since the financial crisis, investors are understandably questioning what the outlook is for U.S. stocks in 2015 and beyond.

While I don’t believe the recent volatility represents the start of a new bear market—I expect the U.S. market should finish the year higher than where it’s at now—today’s valuations suggest U.S. returns may be below average over the longer term.

First the good news. Despite growing fears of a recession, the U.S. economy is sound, even if growth for the year is likely to once again disappoint. Recent economic data point to some growth firming, inflation remains hard to find and long-term rates are up by barely 10 basis points (bps) from where they started the year, according to data accessible via Bloomberg. Meanwhile, the Federal Reserve (Fed) is highly unlikely to raise rates more than once in 2015, and will probably adopt a similarly languid pace to tightening in 2016. All of this suggests that, absent more scares from China, the U.S. market probably will finish 2015 with a nominally positive return for the year.

What’s to come after 2015?

Looking ahead to 2016, the big risk to U.S. stocks remains an emerging market-induced global recession. Emerging markets account for a growing percentage of global growth, and the recent slowdown in the emerging world isn’t limited to China, as data from Bloomberg demonstrate. Economies in Brazil and Russia are contracting, and most large emerging markets, with the possible exception of India, are slowing, according to the data. But while 2016 is likely to be another year of slow global growth, I don’t foresee a global recession. While China remains a genuine threat, the government has additional monetary and fiscal tools to manage its slowdown. As such, I also don’t see a bear market starting during the first half of 2016.

That said, investors looking out 12 months or more may need to have modest expectations for U.S. stocks. While domestic fundamentals are solid, there are headwinds. Margins are at record highs and are likely to come under pressure as wages firm and rates creep higher. A strong dollar is proving problematic for U.S. companies that sell abroad. But arguably the biggest headwind is valuation. According to Bloomberg data, U.S. large cap equities, as represented by the S&P 500, trade at roughly 17.5x trailing earnings and more than 25x cyclically-adjusted earnings. Both measures are comfortably above their long-term averages. In the past, similarly high valuations have been associated with below-average returns over the longer term.

To be sure, markets have staged big rallies from high valuations—stocks had a number of stellar rallies in the late 1990s when valuations were already high, for instance. However, valuations have mattered in the past, particularly when you look at time horizons of a year or longer using data from Bloomberg. Looking at annual price returns over the past 60 years, Bloomberg data show that annual price returns have been roughly 5 percent when the starting valuation on the S&P 500 was above the long-term median, roughly 16.5x trailing earnings. In contrast, according to the data, when the starting valuation was below the median, annual returns were generally in the low- to mid-teens. Investors should also take note that poor years—those in the bottom quartile of returns—tended to be worse when starting valuations were more elevated over the long-term average.

For investors the main takeaway is that while U.S. stocks are still likely to outperform U.S. bonds, neither may provide particularly exciting returns over the next few years.

Russ Koesterich, CFA, is the Chief Investment Strategist for BlackRock. He is a regular contributor to The Blog.