Before it joins the chorus, Wall Street is waiting to hear the song that emerges from President Reagan's meetings with Congress to cut the $148 billion federal budget deficit. ``The meeting is a step in the right direction,'' says Thom Brown, chairman of the investment policy committee at Butcher & Singer Inc. in Philadelphia. ``They're spending too much money. If they can just acknowledge that simple fact of life and cut spending ... there's no guarantee that the economy will stay out of hot water, but we can't spend forever.''
The agreement to meet is ``a necessary move, given the jittery nature of the capital markets during the last couple of weeks and particularly during the last few trading sessions,'' observes James von Germeten, president of the Boston Company.
Today the House of Representatives is expected to vote on the Democrats' budget package, despite the negotiations that started Tuesday between congressional leaders and administration officials on the specifics of cutting $23 billion from the deficit.
Tuesday's activity followed a meeting Monday between the President and members of Congress to discuss ground rules for what areas, including taxes, would be on the table.
Mr. Reagan has historically opposed raising taxes, cutting defense spending, and meeting with Congress to discuss the budget. Now the only area he has labeled off limits is social security.
``You've seen a tremendous change on Reagan's part,'' notes Richard Walton, president of Morgan Grenfell Capital Management in New York. But the prospect of raising taxes does not bode well for the country, he says.
``I did not like the thrust of the questions during the President's press conference last Thursday,'' Mr. Walton says. ``If your concern is about the market, and you raise taxes, you will create a recession. The ideal answer is to reduce the expenditure level.''
Mr. von Germeten says Congress and the President should have four goals: calming the financial markets, reassuring the international markets to keep the dollar from coming under pressure, maintaining a low level of domestic interest rates, and sustaining steady economic growth. ``There is a certain incompatibility with these goals, however,'' he notes.
The country needs a responsible plan from the President and Congress to get out from under the deficits, says Hank Greenleaf, president of H.T. Investors Inc. in Providence, R.I. With the presidential election approaching, Mr. Greenleaf says he is not sure that the country will see anything concrete for a while.
``Without something to give confidence, I don't see people returning to stocks now. It's a great idea to get Congress and the President together,'' Greenleaf says, ``but who's going to believe it until something is done? I'm afraid we may have to wait until after the election.''
One factor that led to the market's fall, Walton says, is the tax bill the House Ways and Means Committee passed Oct. 15, which would cut spending by about $11 billion and raise taxes by $12 billion. Under the Gramm-Rudman budget-balancing law, Congress has until Nov. 20 to cut the fiscal year 1988 budget by $23 billion or else face automatic spending cuts.
The House bill would levy an excise tax on corporate raiders and eliminate breaks gained from mergers and acquisitions. ``In many cases, merger and acquisition activity has fueled growth,'' Walton says.
Von Germeten, however, says that the trigger in the market upheaval was the recent rise in interest rates. ``There was the implication that higher rates were being matched overseas,'' he explains. ``The reality was that the United States Treasury was going to be unable to hold the dollar at those levels overseas.''
Some people blame administration policies for causing the upheaval in the markets. In his first term, Reagan proposed and Congress agreed to a drastic tax cut as part of what is known as supply-side economics, which was designed to give money back to consumers and corporations and thereby stimulate spending and raise revenues. This increased availability of money was supposed to eliminate by 1984 the budget deficit, and simultaneously finance a defense buildup.
During that time, recession hit in 1981, consumer and defense spending did increase dramatically, and by fiscal year 1986 the budget deficit had ballooned to $221 billion. In addition, a stronger dollar led to record trade deficits.
``The administration thought it could follow a supply-side policy without responsibly restricting spending,'' Greenleaf says.
It is not fair to cite administration policies as the sole cause of the market's fall, however.
For one thing, the US economy is in its 59th month of growth, a record postwar recovery, and the bull market celebrated its fifth anniversary in August. Laws have improved business conditions, by increasing corporate cash flows, reducing tax burdens, and encouraging the growth of smaller businesses. ``I think it's unfair to lay all the market's problems at the administration's doorstep,'' says David Rajala, director of equity management for One Federal Asset Management, a subsidiary of Shawmut Bank. ``Steps that were appropriate at the time might not be appropriate now, given the world environment they operate in.''
Many people are willing to take credit for what happens when conditions are good, von Germeten notes. ``Few are willing to take the blame when things are not. Clearly Congress and the President have spent years pointing fingers at each other,'' he observes. ``I believe in the Federal Reserve leaders to keep the underpinnings of the economy going forward.''
In the past week the Federal Reserve has responded by injecting reserves into the system and lowering short-term interest rates. ``The Fed has moved aggressively,'' von Germeten says.
For those who want to see the government respond, Mr. Rajala cautions against too much activity. ``I'm concerned too much might be accomplished,'' he says.
``Too much'' is a $30 billion deficit cut at this time, any tax that would reduce disposable income, or any sales tax that would raise prices 1 percent, he says.
``Budget reduction has been a problem for a very long time, and Congress might do too much and cause a major shock,'' he says. ``We need to see if the market can move up without creating softness in the consumer sector, and we need to see growth overseas.''