A U.S. industrial renaissance is fueling a strong equity bull market, but it's going unrecognized because fear and uncertainty have gripped the markets, says Richard Bernstein.

And, he notes, that's a good thing from an investment advisor’s perspective.

"When's the last time a bull market has started when investors are certain?" Bernstein of Richard Bernstein Advisors asked an audience at an Investment Management Consultants Association (IMCA) conference in New York City this morning.

The message by Bernstein was that advisors need to look at the mass level of concern, much of it based more on perception than reality, as an opportunity. Conversely, he noted that a time to be cautious is when the market seems is lockstep in the optimistic pursuit of the hot investmen such as the dot.coms in the 1990s.

"The time you should worry is when people are certain," he said.

Bernstein told a ballroom full of advisors that the U.S. is in the midst of what will probably turn out to be the biggest bull market of their careers—one which in some ways mirrors the bull markets of the 1980s and 1990s.

A characteristic off all these bull markets is that investors were late to recognize they were happening, he said.

“You have to remember that bull markets are periods of fear and uncertainty,” he said. “They’re not periods of wine and roses.”

Bernstein, who served as Merrill Lynch’s chief investment strategist for more than 20 years, said the U.S. is four years into an equity bull market that resulted in 100% growth. Among the driving factors were the resurgent growth among small- and mid-cap U.S. industrial companies that have benefited from compressed wages and cheap energy prices.

“The U.S., outside of the Middle East, has the cheapest gas prices in the world,” he noted.

Domestic companies are also starting to reconsider the cost-effectiveness of outsourcing manufacturing jobs, he said. While the strategy has been driven by wage considerations, companies are starting to see the downside to outsourcing in other areas, such as the difficulty in maintaining quality control in foreign locations.

Calling the trend an “American industrial renaissance,” Bernstein called it a “pure play” for investment advisors that “really only in the first and second inning… This is really in its infancy.”

But what are advisors to make of the issues that have investors—and more importantly, clients—jittery about U.S. equities, such as the threat of inflation, the U.S. debt, slowing profits and the possibility of too much easing by the Federal Reserve?

Bernstein said they are legitimate concerns, but also the identical concerns that dissuaded people from investing in the bull markets of the 1980s and 1990s.

Profit margins fell throughout the bull market of the 1980s, he noted, and investors during the early part of the decade were fretting about what was the largest peacetime U.S. budget deficit in history. “But back then it was the Democrats who were concerned and the GOP that didn’t care,” he said.

The Federal Reserve was also a source of unease back then, he explained, but it was because of what was perceived as too much tightening by former Federal Reserve Chairman Paul Volcker. Also, then as now, the start of the bull market was characterized by GDP growth of between zero and 2.5%, he added.

Bernstein also argued that the three historical indicators of a bear market—too much Fed tightening and an inverted yield curve, equity overvaluation and too much investor enthusiasm—are not currently a concern.

While some may argue that equities are overvalued, Bernstein countered that the Shiller P/E index, when adjusted for interest rates, remains relatively cheap.

Investors, meanwhile, continue to shy away from equities, he said. Equity allocations in pension funds are at their lowest in decades, and Wall Street equity allocations are averaging below 50%, off the historical norm of between 60% and 65%.