“After a huge stock-bubble burst, the stock market historically has pursued a painful and predictable path. This time, it hasn’t quite followed the script, and that is making some stock analysts nervous,” writes E.S. Browning in today’s Wall Street Journal.

” ‘I ask myself about this every night before I go to sleep, and I have to say that, sometimes, I don’t get to sleep,’ says Peter Bernstein, a longtime investor, consultant to investment institutions and author on market history.”

“The problem, in a nutshell, is that after the 1990s bull market peaked four years ago, in the first quarter of 2000, the stock market fell for 2½ years, until October 2002. And yet, by classic measures of stock value, stocks never reached the depths hit in other collapses, such as in the 1930s or the 1970s.”

“By these measures, which compare stock prices with corporate earnings, the gains of the late 1990s had been greater than those of any previous bull markets. The price of the Standard & Poor’s 500-stock index rose to more than 40 times its companies’ earnings, twice as high as in 1929. When stocks fell, the price-to-earnings ratio also fell, but it never returned even to the average of the preceding 80 years, which is about 16. By traditional measures, stocks never hit the bargain basement. They never fell below the historical average, and the worriers say that stock values can’t remain above average forever.”

” ‘Typically, after a bubble, the market falls back below fair value and breaks everyone’s heart,’ says Jeremy Grantham, a founder of Boston money-manager Grantham, Mayo, Van Otterloo, who has studied past bubbles in a variety of stocks and commodities. ‘That hasn’t happened.’ “

“For all the agonizing declines, the bear market we have just endured was in some ways less painful than other major bear markets. This time, stocks fell almost to a level in line with their average historical value — and then they bounced. They have soared, so far, by 46% off their October 2002 bottom, based on the value of the Dow Jones Industrial Average. The more volatile Nasdaq Composite Index, with its many tech stocks, is up almost 83% and the S&P 500 has gained 47%.”

“If Mr. Grantham is right, the current rally is a fool’s paradise — the prelude to a deadening decline that he calls ‘the end of the world.’ He says it could begin late this year and stocks could fall even further than in 2002.”

“And yet, others who have studied past bubbles disagree. They see the market continuing to advance.”

“Who is right will have an enormous impact on the savings, and the future happiness, of millions of Americans who have returned to the stock market in recent months.”

“Most of the experts do agree on two things. First: Stocks don’t look poised for a big drop any time soon. But second: Even many of those who think the market will avoid a sharp decline worry that overall stock performance could prove lackluster for years.”