nation's economy is headed for a "soft landing," but some warn that the rally has been misleading.

A soft landing is a slowing of economic growth that cuts inflation risks without turning into a recession. It is what the Federal Reserve is striving for with measured interest rate increases, and it would be the best scenario for banks and their shareholders.

If it happened, a soft landing would ensure that the current economic expansion, already under way for eight-and-a-half years, would be the nation's longest business upswing in either peacetime or wartime.

Investor expectations of a soft landing were heightened by news last week that wage growth was tame in October, while job growth remained strong. There was also a welcome September slowdown in consumer spending, from a previously frenetic pace.

Moreover, the government's recently revised statistics show that the economy has been enjoying more real growth with less inflation than previously believed.

A number of Wall Street economists say these benign reports mean the Fed will raise rates only one more time, perhaps at its meeting next Tuesday. Some say rates may have already peaked.

That cheerful prospect is already being reflected in the revival of bank stocks and other financial stocks. A month ago, prices for many of those stocks were dropping at a double-digit pace. But some veteran Wall Street watchers think the great 1990s bull market in stocks is in jeopardy because of what the Fed has already done: raised rates twice in the summer, and gradually slowed money supply growth. Those actions could undermine prospects for a soft landing of the economy.

Strategist Charles H. Blood Jr. of Brown Brothers, Harriman & Co. in New York said he expects Fed actions now moving through the economic pipeline to create a bear market next year. Indeed, he views the current upturn as an early bear-market rally and advises clients to lighten their equity portfolios.

A bear market is a prolonged period of falling stock prices on lower trading volume, usually with new lows after each rally in a declining sawtooth pattern.

"After two years of monetary stimulation and lower inflation related to the Asian economic crisis, financial and technical indicators have turned unfavorable for equities," he recently told clients. "Interest rates have risen, money supply growth has slowed, and the Fed has moved to a 'neutral' monetary policy.

"Within the stock market, poor breadth (the number of stocks involved in a market move) and lower volume confirm that the flow of money to equities is reversing," he said. Mr. Blood said he expects stocks to remain in their trading range before declining next year, as do others.

"Historically, stocks go sideways for a short time on their way up or down," according to economist and money manager A. Gary Shilling. He says the market is headed down, but says he does not expect bulls "to just roll over and die without a fight. After a 17-year run, investors aren't going to give up easily."

However, "given stocks' nosebleed altitude, we think the Fed has already raised rates enough to spawn a major bear market," he said. Another rate hike on Nov. 16 would increase the likelihood of a 2000 recession, said Mr. Shilling, who heads his own firm in Springfield, N.J.

A faltering of the bull market could affect the economic outlook in another way, suggested Edward Yardeni, chief economist at Deutsche Banc Alex. Brown in New York. He says the bull market is part of the reason that wage inflation has been remarkably tame despite a 30-year low in unemployment.

"As populist capitalism has proliferated with profit-sharing incentive plans, including grants of stock and stock options, workers have been less interested in wage gains and more excited about capital gains," he said.

So far, that has lessened the pressure on the Fed to raise rates further, and Mr. Yardeni says he does not think additional rate hikes are likely "anytime soon." But he says he worries that the bull market is now being led by too few stocks and is vulnerable to economic shocks such as year 2000 computer-related problems.

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