The stock market is having a rough go. Since hitting an all-time high on the first trading day of the year, stock prices have fallen by more than 20%. Known as a bear market, the losses have been financially painful. Trillions of dollars in stock wealth has evaporated this year.

Despite investors' gloom, the worst of the bear market is at hand. Of course, stock prices are sure to go up and down in coming days and weeks. And though they will not come roaring back anytime soon, the downdraft in prices is nearly over.

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Looking out on the next five years — the shortest horizon prudent for stocks given their volatility, and thus risk — annual stock returns in the mid-single digits seem likely. Sure, these aren't the double-digit returns of the two decades since the dot-com bubble burst, but they are solid returns nonetheless.

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My optimism reflects the view that stock investors have internalized a stark reality: To combat high inflation, the Federal Reserve will have to raise rates aggressively in the months ahead. Fed officials have made it clear they plan to double the federal funds rate, the interest rate they directly control, by early next year. If they follow through as investors widely expect, the funds rate ultimately will be at its highest point since before the financial crisis that occurred well over a decade ago.