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