“Jim Paulsen recalls the moment as part epiphany and part shock,” writes Jonathan Laing in this week’s Barron’s.

“It was in April when he realized that more time had elapsed without a new stock-market high than the 484 trading days it had taken the market to claw its way back from the 1987 crash. The realization only reinforced the view of the economist and chief investment officer of Wells Capital Management that something was drastically wrong with the powerful post-1982 bull market, which up until recently seemed to overcome all manner of obstacles in its upward ascent, from the ‘jobless recovery’ of the early-‘Nineties recession to the Russian ruble and Long-Term Capital Management crisis in the fall of 1998.”

” ‘It dawned on me that just maybe the buy-and-hold mantra of today’s generation of stock-market investors might at long last be destined for the ash can of history and that a solid stock-market recovery might not be just around the corner,’ Paulsen told Barron’s. ‘In fact, the rules of the game seem to be changing in ways likely to shatter the expectations of millions of investors.’ “

“Signs abound that the current stock-market downturn is no typical slump. For starters, stock prices remain mired at levels sharply below their highs of more than two years ago. The Nasdaq sits more than 70% below its March 2000 high of 5048, while the Standard & Poor’s 500 Index has sunk some 36% below its record close of 1527. Only the Dow 30 Industrials are within hailing distance of their January 2000 peak of 11,722, though still down some 22%.”

“More ominous, perhaps, is the fact that the stock-market funk has seemed impervious to all the usual remedies. The Federal Reserve has administered repeated adrenaline jolts of monetary easing since January of 2001 and yet the S&P today is more than 20% lower than it was when the Fed began lowering interest rates. Typically, stocks rebound once the economy begins to recover. Yet prices are down some 15% from this January, when most economists felt the recession of 2001 ended. And at present the stock market seems to be drifting ever lower toward the panic lows it set in September, just 10 days after the terrorist attacks.”

“Nor does history offer any comfort to today’s stock investors. The last three stock-market manias that ended in 1901, 1929 and 1966-68 were followed by 15 to 20 years of horrible average annual returns, ranging between 2% and 5% — or zero to a negative 1.8% after adjusting for inflation.”

“And no prior market mania saw anything resembling the magnitude and excesses of the most recent stock-market bubble. Yet most investors, according to recent polling, expect annual stock-market returns to resume their recent 15%-20% pace momentarily. History, regulatory backlash, misunderstood market fundamentals and the continuing stock-market overvaluation all argue that such investor expectations will be brutally dashed. Still regarded as El Dorado or Golconda, Wall Street may be early on its path to becoming the street of broken dreams.”