From S&P, some G&C (gladness and cheer) on '88 stock market

`STOCKS generally are fairly valued.'' That's what the Standard & Poor's Outlook being mailed to subscribers this week says. It reflects a somewhat cheerier mood both on Wall Street and among economists.

The popular investment advisory publication, in its annual forecast issue, predicts that stock prices could go as high as 285 as measured by Standard & Poor's 500 index (equivalent to about 2,250 according to the Dow Jones industrial average). That is about 20 percent above the current market level. Stocks could reach a year-low of 205 on the S&P 500 (or 1,625 for the DJIA), which is 15 percent below present prices. And prices might end up the year about where they are now, the Outlook forecast says.

So the Outlook analysts are giving a considerable range in their 1988 forecast, a decision that might well be justified, considering the volatility of stock prices demonstrated last week. Yet it is a more cheerful outlook than that offered by many on Wall Street after the Oct. 19 market plunge.

``The pendulum swung too much to the gloomy side,'' says Outlook senior editor Martin Skala.

In the economic area, Michael W. Keran agrees. ``People are ignoring all the strengths in the real economy because the stock market took such a hit,'' says the chief economist at the Prudential Insurance Company of America.

Dr. Keran is predicting an annual growth rate for the current quarter of 4.5 percent, even above the 4.1 percent rate in the third quarter. The decline in wealth resulting from the market debacle will prompt consumers to cut back on their expenditures somewhat, says Keran. But this will be offset by sharp increases in business fixed investment and exports.

Certainly so far retailers appear to be enjoying reasonably good Christmas sales. Moreover, surveys of business conducted by the 12 Federal Reserve district banks found almost no noticeable effect on business spending plans from the market bust.

Indeed, there are reports that many economists are adding back into their forecasts for 1988 some portion of the 1 or 2 percent most shaved off those predictions right after ``Black Monday.''

If the relative impunity with which this economy has accepted a plunge of about 27 percent in stock prices has surprised capitalist economists, just think of the puzzlement to communist economists. For decades, communists argued that capitalism was so unstable it would destroy itself. As capitalism continued to thrive, many communists dropped that dogma in the 1970s. The hardiness of free enterprise continues to shake up communism.

Today this resilience of capitalism may be welcome in much of the Soviet bloc. Soviet party chief Mikhail Gorbachev has acknowledged the growing economic interdependence of the world. The Soviet economy, though more isolated than most industrial economies, still depends for its welfare to a considerable degree on exports of oil and other products whose price would likely decline in a recession. And Mr. Gorbachev has ambitions for modernizing the Soviet economy and expanding its exports - a goal dependent on continued prosperity in the West.

It may be that the stock market collapse or tight money will yet slow down the American economy. Keran suggests that growth will be limited to a 3 percent annual rate in the first half of 1988, because of weakened consumer demand. But it is a change when both communist and capitalist applaud continued economic growth in the Western bloc.

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