The recent rally in U.S. stock prices has put the market at lofty levels, which means equity investors shouldn’t expect more than 7 percent to 8 percent returns in the next decade, says mutual fund legend John Bogle, founder of Vanguard Group.

“The adverse events, even black swans, that we've seen are pretty astonishing,” he told CNBC.

“But the market has fought its way through all that. ... This is a market focused on the short term and also pretty clearly a fairly expensive market.”

John Bogle (AP photo)

Measuring the price-earnings ratio with the last 10 years of reported profits, the P/E ratio of the Standard & Poor’s 500 Index stands at 22.5, Bogle says. “That's a high P/E, and the odds are that a decade from now it will be lower.”

Dividend growth of 2 percent and earnings growth of 6 percent dictate an 8 percent annual return for stocks over the next 10 years, he says. “But the PE might be lower at the end, reducing that a little bit maybe to 7 percent.”

So investors should be satisfied with that gain and happy that it would exceed the likely 4 percent return on bonds.

Not everyone shares Bogle’s caution. “We’ve got a pretty solid operating environment for businesses,” Jeffrey Kleintop, chief market strategist at LPL Financial, tells Bloomberg.

“We’ll get earnings starting next week which will reflect these conditions. In addition to that, there are lots of buyout deals getting done out of cash.”