EVEN the most zealous Wall Streeter would be hard pressed to argue that the stock market is an unerring forecaster. The market, after all, kept rising throughout the 1920s despite the disaster it was to meet at the end of the decade. And yet, for all the thousands of ups and downs shown by market averages over the years, Wall Street has tended to be a fair barometer of underlying US well-being. Analysts will have their eyes glued to the market this week for signs of any change from the recent pattern. Still, what Wall Street has been saying until last Friday - despite the Iran affair, despite the Boesky insider-trading scandal, despite continuing federal budget and deficit woes in Washington - is that the economic and legislative underpinnings of the American society are basically sound.
Market conditions could change. There are various technical factors that warrant attention, such as the wave of mergers that have helped drive the market. The mergermania could end now that the new tax reform law is coming into effect, in turn working as a brake on the market. Still, it is remarkable that the market the past two weeks has continued its climb toward the 2,000 mark. Even the day President Reagan held his brief noon-hour conference announcing the Poindexter-North departures and the Iran-contra link, the market rose, the Dow Jones industrial average climbing 6.05 points to finish at 1,912.12. Compare that with the day President Reagan was shot - Monday, March 30, 1981. The market had been climbing that day. After reports of the assassination attempt, business came to a standstill and prices slid. On Tuesday, March 31, buoyed by news of the President's recovery, the market sprang up 11 points, closing above the 1,000 level.
For now, at least, Wall Street seems to be largely discounting the fallout from the Iran affair. That is not to say that all is upbeat. There is increasing concern, as last Friday's trading activity shows, about Mr. Reagan's conceding that ``mistakes'' had been made in his Iran policy. Friday trading losses might also reflect concern about the Boesky case.
The economy continues its slow progress. Growth this year is expected in the 2 to 3 percent range, with more of the same for next year. But that's the way many Europeans, particularly the West Germans, like their growth. Slow and steady, so as not to trigger a substantial increase in the US inflation rate.
And look at the problem areas: Unemployment remains stuck at the 7 percent range, as last Friday's figures indicated. It would have been better had the rate fallen. But at least it didn't rise. Housing starts are off, and concern about consumer spending remains. But too many consumers are overburdened with debt. On the trade front, Treasury Secretary James Baker is taking the lead on the protectionism issue, talking compromise with Congress. The trade deficit itself has fallen somewhat for three months in a row. And the administration, which is finishing up work on its $1.1 trillion budget for fiscal 1988, claims that not only are Gramm-Rudman-Hollings deficit reduction targets being met (on paper at least), but that it may even get the budget to Congress earlier than usual, to help speed up the legislative process.
In such an assessment, complacency needs to be guarded against. Still, a continuing steady economy must be nurtured. It provides breathing room for lawmakers, so that they can take the time to pursue the Iran inquiry to its conclusion. And it grants space for lawmakers to take steps to square away the budget - and the still far-too-high deficit.