For the last five years, the S&P 500 Index has been climbing at a rate of more than 15 percent a year and everybody thinks we are living in a low-return world. “How in the world are we in a low-return market environment?”  asked Richard Bernstein, CEO/CIO of the eponymous investment management firm, noting this is already the second-longest bull market in history.

He told reporters at a luncheon sponsored by Eaton-Vance that the seven-year-old bull market isn’t “close to the end.” Before starting Bernstein Advisors in 2009 and launching several mutual funds with Eaton-Vance, he was the top-ranked equity market strategist on Wall Street for most of the previous two decades.

In 2012, Bernstein predicted that U.S. equities were in a bull market that might exceed the great bull market from 1982 through 1999. In 2013, the S&P 500 rose 33%.

But a huge gap between perception and reality still exists. Pessimism, coupled with a lack of euphoria, is still pervasive.

It would be one thing if the perception of a low-return market were simply held by retail investors still shell-shocked by the financial crisis. Amazingly, the misperception is widespread among sophisticated investors at endowments, pension funds and hedge funds.

Indeed, the rise of passive management may be partially attributable to major-league blunders in various sectors of the larger asset management business. “Why haven’t hedge funds been levered long?” Bernstein continued. After all, they exist primarily to capitalize on micro- or macro-economic market anomalies, or so they claimed.

Instead, most hedge funds have been hunkered down in their bunkers with short positions and other purported hedges like gold. The upshot is that big institutional investors have fled from them like they were skunks at the garden parties. Many once-famous hedge funds have retreated or folded completely.

“Find me an investor who says I can’t get enough equities,” he declared. Or find an investor who wants to leverage themselves up in equities.

The probability of surprises to the upside remains high, Bernstein said. At this stage in the market cycle, a transition from growth to value could be expected as a natural phenomenon to extend the bull market.

In Bernstein’s view, there are two types of bull markets. One type, like the current bull market, is led by a boom in profits. The other is driven by price-to-earnings multiple expansion.

He believes the profits recession of the last year, triggered by falling oil prices and a surging U.S. dollar, is coming to an end. By next year’s first quarter, many companies, particularly energy concerns, will go up against very friendly year-over-year comparisons.

Eddie Perkin, the head of U.S. equities at Eaton-Vance, agreed with Bernstein, but he said investors need to be more selective at this stage of the bull market. With the S&P 500 at 17 or 18, it isn’t cheap but it’s not in thin-air territory.

Certain sectors, like consumer staples and other low-volatility, dividend-paying stocks, are fully valued at 19 or 20 times earnings. “My point isn’t that stocks are undervalued, but they could go a lot higher,” Perkin said. “Too much money is ready to buy the dip.”

To keep the economic expansion and bull market going, Perkin said capital expenditures “need to pick up.” While it represents a fairly small sector of the economy, the swing factor is often what determines whether growth is dismal or robust.

Asked if the bull market in equities might be borrowing from future returns and moving them forward as many have claimed, Bernstein and Perkin said they weren’t buying into that theory.

What signs would be necessary to see the end of a bull market on the horizon?

Bernstein cited three indicators: widespread euphoria, an aggressive Fed and tremendous overvaluation. Take out a handful of mega-cap tech stocks in 2000 and the S&P 500 sold at about 25 times earnings, while the 10-year Treasury yielded 6.25 percent. Today the 10-year Treasury is 1.75 percent, which would make a 25 P/E multiple less of a stretch. And it’s nowhere near there.