Stock marketInvestors know that the U.S. economy continues to experience strains in the aftermath of the financial crisis. Yet there's major disagreement over a far more pessimistic notion that gained currency during the depths of the downturn. Dubbed the "New Normal" and pushed relentlessly by bond giant Pimco, this darker view suggests that the crash of 2008 ushered in a new era of American economic history marked by much slower growth.

The basic argument: As indebted consumers focus on repairing their balance sheets and as regulatory burdens increase following an era of deregulation, overall growth simply will not be as vigorous as it was in the past. That's the New Normal in a nutshell.

Looking on the Bright Side

But a growing roster of high-profile money managers have taken aim at this theme. Billionaire fund manager Ken Fisher of Fisher Investments recently called the view "idiotic" and predicted the decade ahead would resemble the boom times of the 1990s more closely than the anemic expansion embedded in the New Normal framework.

Jim Paulsen, the chief investment strategist of Wells Capital Management, listed evidence showing that the current economic expansion is just as robust on many measures than past recoveries, despite predictions for muted growth.

Real GDP expansion in the first year following this recession came in at 3% compared to 2.6% in 1991 and 1.9% in 2001, for example. And persistent job creation lagged the end of the last two recessions by 12 and 21 months, compared to just six months this time around.

The first 14 months of the current recovery have seen 205,000 jobs lost, compared to 220,000 and 935,000 during the 1991 and 2001 downturns.

While technically correct, these measures may nevertheless overstate Paulsen's case. The National Bureau of Economic Research recently marked the recession as officially over last summer.

Normal Is a State of MInd

Yet, the duration of the downturn was the longest on record since the Great Depression. The bloodshed on the jobs front peaked as far back as January of 2009, and long-term unemployment remains at near-record highs. That makes comparisons with more recent recessions less convincing.

Arguably, the notion of a New Normal rests on even thinner evidence, but it nevertheless seems to have a significant impact on the psychology of financial markets. Investors have piled into assets like bonds, despite rock-bottom yields, while they shun a relatively cheap stock market.

The New Normal view has long been criticized as self-serving, since Pimco manages the world's biggest bond fund, and the forces it outlines tend to favor the bond market. But the firm has used its enormous success to push into the equities market, and Pimco head Bill Gross now seems to espouse a more careful position.

The New Winners

Amid the malaise, superior returns may be found by focusing on roaring emerging markets and stocks that pay solid dividends, such as Procter & Gamble (PG) and Johnson & Johnson (JNJ), Gross said recently. And safe instruments, like government bonds, may be too expensive if the Fed can add further heat to the recovery.

Other investing superstars, like David Tepper of hedge fund Appaloosa Management, have also made a strong case for stocks recently. But the New Normal framework has had an impact that reaches beyond investors' asset allocation decisions. Despite scant supporting evidence, it's even affecting how economic policy has been shaped, as Paulsen noted. It has also taken a toll on consumer and employer sentiment across the board.

Still, the New Normal view may have a kernel of truth, and investors probably shouldn't abandon it wholesale. What seems to be emerging now, however, is a healthy -- and long overdue skepticism -- about its overarching conclusions.

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