(Bloomberg News) Valuations for U.S. equities have been stuck below the five-decade average for the longest period since Richard Nixon's presidency, a sign investors don't trust earnings even after a three-year bull market.

Analysts estimate profits in the Standard & Poor's 500 Index will reach a record $104.78 this year after increasing 125 percent since the end of 2009, the fastest expansion in a quarter century, according to data compiled by Bloomberg. American companies are boosting income so much that even after stocks doubled, the S&P 500 hasn't traded above its 16.4 mean ratio for 446 days, the longest stretch since the 13 years beginning in 1973.

Battered by the 14 percent decline in the S&P 500 since 2000, the worst financial crisis since the Great Depression and the so-called flash crash 21 months ago, investors are staying away from stocks, even after record profits, 10 quarters of U.S. economic growth and promises by the Federal Reserve to keep interest rates near zero through 2014. Of the $37 trillion erased from global equities in the credit crisis, $24 trillion has been restored.

"After two significant bear markets, the flash crash and the lost decade, many have simply said, 'No mas,'" Howard Ward, who helps oversee $35 billion at Gamco Investors Inc. in Rye, New York, said in an e-mail on Jan. 24. "Of course, bull markets have a history of climbing a wall of worry. And it is happening again."

The Fed's pledge to keep interest rates low through 2014 helped send the S&P 500 up 0.1 percent to 1,316.33 last week and extended its 2012 advance to 4.7 percent, the best start to a year since 1989. At the same time, an average of 6.69 billion shares traded on U.S. exchanges in the 50 days ended Jan. 18, the fewest since at least 2008, according to data compiled by Bloomberg.

The S&P 500 trades for 13.7 times profits. It was last above the mean valuation since 1954 on May 13, 2010, less than a week after $862 billion was erased from U.S. equity values in 20 minutes, data compiled by Bloomberg show. The slump has surpassed the two longest periods of the last quarter century, in 2008 and 1988.

Profits for the 169 companies in the S&P 500 that reported earnings since Jan. 9 have risen 3.2 percent from a year earlier and beat analyst projections by 2.9 percent, the data show. Apple Inc. in Cupertino, California, the world's biggest technology company, Providence, R.I.-based defense contractor Textron Inc. and 110 other companies posted higher- than-forecast earnings in the three months ending Dec. 31.

Big Surge

Companies in the S&P 500 earned $657 billion in the first nine months of 2011, including $225.2 billion between April and June, the most for any quarter in at least 12 years. That's 72 percent more than the comparable period in 2008. U.S. GDP, which grew at a slower-than-forecast 2.8 percent rate in the fourth quarter, totals about $13.4 trillion, data compiled by Bloomberg and the Commerce Department show.

"Corporate America is extremely lean, extremely efficient at this time," said Peter Sorrentino, a senior fund manager who helps oversee $14.5 billion at Huntington Asset Advisors in Cincinnati. "You can accumulate these stocks at attractive valuations."

The last two times the S&P 500 slumped below its historic average, equities rallied. The benchmark index is up 42 percent since it climbed above the five-decade mean in June 2009. It spent 14 months below the average level from August 1988 through October 1989 before quadrupling within eight years starting in October 1990, data compiled by Bloomberg show.

Stocks Versus Bonds

Investor doubts helped send new equity sales by U.S. companies down 4 percent in 2011 as interest rates near record lows spurred companies to issue bonds instead. U.S. corporate debt sales rose 0.9 percent to $1.19 trillion, according to data compiled by Bloomberg.

Customers of U.S. stock mutual funds have pulled out more than $146 billion since May 2010 as the S&P 500's valuation shrunk by as much as 33 percent.

The longest valuation slump lasted from June 1973 through January 1986, according to data compiled by Bloomberg. The start coincided with the Watergate scandal that led to Nixon's resignation and the Arab oil embargo, marking the end of a three-year bull market as shares declined 32 percent over 16 months.

The U.S. economy contracted three of the four quarters in 1974, consumer prices climbed 12.3 percent in December and unemployment reached 9 percent in May of the following year. Gross domestic product shrank 5.1 percent from the fourth quarter of 2007 to the second quarter of 2009, according to the Commerce Department.

'Extraordinary Long Time'

"One reason why the S&P 500's P/E has been so low is the fact that it has taken an extraordinarily long time for the GDP to reach its pre-recession level," said Komal Sri-Kumar, the Los Angeles-based chief global strategist at TCW Group Inc., which oversees about $120 billion. As in the 1970s, "we have a situation today which is also a structural change."

Analysts say the current slump is different from the one that started more than 38 years ago. Equities face less competition from fixed-income investments and inflation compared with the 1970s and 1980s. The yield on the 10-year Treasury note peaked at a record 15.84 percent on Sept. 30, 1981. The consumer price index surged during the oil crisis in 1973, rising from 2.7 percent in June of 1972 to 12.3 by the end of 1974. It peaked at 14.8 percent in March 1980.

All-Time Low

Today, the 10-year yield is 1.89 percent and touched an all-time low of 1.67 percent four months ago. Consumer prices increased 3 percent from the previous year in December, according to Labor Department data.

"In the 1970s, low P/Es were accompanied by high inflation and high interest rates," Nick Sargen, chief investment officer at Fort Washington Investment Advisors in Cincinnati, which oversees $40 billion. "That's obviously not the case today, where the culprit is uncertainty about the global economy and financial system."

Hayes Miller, who helps oversee about $46 billion as the Boston-based head of asset allocation in North America at Baring Asset Management Inc., said the U.S. environment looks good both economically and in terms of earnings. "It's going to be a long clean-up, but we do expect markets to be up this year."