The Standard & Poor's (S&P) 500 index has lost 17 percent since the start of 2000 after sinking almost 10 percent this month, total return data compiled by Bloomberg show.
The decline would be the first in 70 years and exceeds the 8.9 percent plunge in the 1930s, following the stock market crash of 1929, show data compiled by New York University's Stern School of Business.
"This is the worst financial experience in world history," said Joseph Granville, the publisher of the Granville Market Newsletter. "The market is crashing. What we're seeing right now is complete demoralisation."
The S&P 500 stood at a record 1 565.15 points one year ago, the peak of a five-year bull market that helped investors recoup losses from the dotcom bust at the start of the decade.
Since then, the measure has tumbled 31 percent, including dividends, as the collapse of the US housing market upended the economy, froze credit markets and saddled financial firms with almost $600 billion in mortgage-related write-downs and credit losses.
The 12-month bear market pushed the S&P 500 to the lowest level since November 2003.
Last month, Lehman Brothers, once the fourth-largest US investment bank, failed in the biggest bankruptcy in history. American International Group, the largest insurer, was seized by the Federal Reserve. Fannie Mae and Freddie Mac, the top buyers of US home loans, were taken over by the government.
Although stocks lost money, 10-year treasury bonds returned 86 percent this decade, according to data compiled by Bloomberg and Aswath Damodaran, a finance professor at New York University.
The S&P 500 fell 0.1 percent to 1 056.33 points as of 9.59 am in New York yesterday after Bank of America halved its dividend and announced plans to sell $10 billion of new stock.
The economic fallout from credit market losses and bank failures has yet to approach the proportions of the Great Depression, when about 7 000 banks failed, according to the Fed.
Between 1929 and 1933, the economy shrank by 46 percent, while one in four Americans were out of a job. Economists forecast US growth of 1.5 percent next year, from 1.7 percent this year.
That makes Barton Biggs, a former Morgan Stanley strategist who now runs the hedge fund Traxis Partners, more sanguine that stocks may soon rebound.
"You've got to make a bet on whether the financial system and the market system, as we have known it since the end of World War 2, is going to survive," Biggs said on Bloomberg Television. "You certainly don't sell on panic here. You buy."
Any rally may depend on efforts to unfreeze credit markets.
Concern that more financial institutions will collapse curbed lending, widening the difference between what banks and the treasury pay to borrow money for three months to 3.87 percentage points last week, the biggest gap since Bloomberg began compiling the data in 1984.
The spread has almost quadrupled in the past month.
The rise in borrowing costs might cause the US government's $700 billion bailout plan to fail, said Robert Stovall, who oversees about $1.6 billion as a global strategist at Wood Asset Management in New York.
The repercussions of property speculation, aided by the lowest interest rates in half a century, may weaken the broader economy further and exacerbate share declines, according to Stovall, who started his career as a junior security analyst at now defunct brokerage EF Hutton in 1953. Earnings at S&P 500 companies fell 5.6 percent in the third quarter from a year earlier, according to consensus analyst estimates compiled by Bloomberg. That would be the fifth consecutive quarterly decline and would match a streak ended in March 2002.
Companies in the S&P 500 are valued at 20.1 times profit from the past four quarters, about 25 percent higher than the median of about 16.1 times normalised earnings since 1972, data compiled by the Leuthold Group show.
"You don't cure a blast wound with a Band-Aid," said Stovall, an 82-year-old World War 2 veteran who has worked in the financial industry for more than 50 years.
"It's quite possible that the residue of all this damage could extend well through 2009."
The S&P 500 fell during the first three years of this decade, its longest streak of annual declines since 1939 to 1941. Investors were battered by the bursting of the technology bubble and the bankruptcies of Enron and WorldCom, two of the largest US companies by market value.
Arthur Cashin, a member of the New York Stock Exchange for 44 years, says the speed and scope of the latest global selloff make the meltdown more dangerous and harder to contain than any previous crisis, after $25 trillion of market value was wiped out worldwide.
The credit crunch "has become a financial forest fire", he said. "I have never seen it happening contemporaneously all around the globe, where everyone is impacted."