NEW YORK -- Four months after the most severe and frenzied stock market plunge in U.S. history -- in which about $1 trillion of paper wealth was vaporized in a single day -- the nation's economy continues to chug sluggishly along.

The financial markets are drifting upward, and a clear majority of economists at the major investment firms here predict there will be no recession in 1988.

Behind this hopeful picture, however, doubters lurk. Never before, some economists and historians point out, has the United States experienced market losses of the magnitude of last October's Black Monday without falling into a severe recession.

Moreover, recessions or depressions following such panics have often taken months to develop. rebounded much as they have early this year, only to collapse again in June 1930.

The possibility of a strong aftershock to last October's collapse lingers like a cloud over the market. Nicholas F. Brady, the investment banker who led a study of Black Monday for the Reagan administration, warned Congress early this month that the market could suffer another plunge.

"Without proper safeguards, a drop of the severity and speed of October can certainly happen again, with even more far-reaching consequences," he said. "We are looking down the barrel, and the gun is still loaded."

John Kenneth Galbraith, a Harvard University economist and an authority on the 1929 crash, sees ominous similarities between the speculative binge of the 1920s and and high-risk debt that helped feed the bull market of the 1980s.

And even some conservative economists, who don't generally side with Galbraith, agreed that there are strong parallels between the present and the past, and that the historical connection between market panics and economic downturns is fairly consistent.

"The stock market has been a moderately good predictor {of economic performance} in that we have never had a recession without a market break, but we have had breaks without a recession, as in 1962," said William Niskanen, formerly a member of the Reagan administration's Council of Economic Advisers and now head of the Cato Institute, a think tank.

In 1962 the stock market fell in a heavy panic, but the U.S. economy continued to expand without interruption, soon pulling stock prices back into a broad rally.

Neither Niskanen nor Galbraith claims to know which precedent the huge market break of Oct. 19 ultimately will follow. Throughout U.S. history, there has been a close connection between market panics and recessions. six full-blown depressions, five of them preceded by a financial or stock market panic.

The pattern during the 19th century was almost always the same: Good economic times produced a speculative boom in stocks or land; the speculation led to abuses; the abuses caused the speculative bubble to burst, ushering in panic; and finally, the panic washed into the economy in the form of mass bank failures and bankruptcies.

The most severe depressions tended to follow the most severe panics. In September 1873, for example, the Wall Street investment firm of Jay Cooke Co. suspended payments to creditors, causing more than 40 New York Stock Exchange firms to close their doors. The exchange itself was shut for 10 days. The market panic was followed by a widespread bank panic as depositors rushed to make withdrawals. Over the next five years, the economy shrank 32 percent.

One of the biggest problems then, as it was during the 1930s, was the fragility of the banking system. With no Federal Reserve System to act as lender of last resort to banks, depositors quickly stampeded their banks into failure. And as new, piecemeal protections developed, speculators found ways to avoid restrictions by creating new financial structures and forms of debt for speculative uses.

Debt of one kind or another was at the heart of most of the worst panics and depressions of the past. And despite the protections afforded by the modern Fed, some historians see unsettling parallels between past panics and the development during the 1980s of huge amounts of commercial debt, such as junk bonds, outside the traditional banking system.

"The best example of that is the panic of 1907, which was started by the failure of the Knickerbocker Trust. What's important about that is that like junk bonds or Eurodollars today, it was a new institution that did not fit under the protective umbrella of the old institutions," said Peter Temin, professor of economics at the Massachusetts Institute of Technology.

Economist Raymond Dalio, head of the consulting firm of Bridgewater Associates, said that his examination of past depressions -- including ones during the last 40 years that have occurred in developing countries -- shows that they are preceded by a cumulative, long-term buildup of debt in an economy.

When the total amount of interest on debt being paid in an economy exceeds the total amount of savings, a severe downturn usually follows, he said.

Such severe economic slumps represent "an unmanaged unwinding of an excessive debt growth brought on over a very large period of time," Dalio said. In the United States, he said, net interest payments began to exceed net savings in 1979 and stand just slightly below that threshold today -- a very high level by historical standards.

The last time in U.S. history that interest payments exceeded savings was 1929, Dalio said.

The role of debt in the stock market runups that preceded the crashes of 1929 and 1987 is one reason historians have drawn close parallels between the two experiences. The use and structure of debt in the two eras was different, but the overall effect was similar.

In the 1920s, individual stock market investors made liberal use of debt to increase their purchasing power -- and their risk -- in the market. In the 1980s, the use of high-risk debt to complete corporate takeovers, restructurings and buyouts helped drive stock prices skyward and generated large pools of money for speculation in takeover-related stocks and bonds.

High-risk debt "was a common feature of the situation before 1929 and before last October's crash," Galbraith said. "One of the reliable aspects of financial dementia is the recurrent rediscovery of leverage. ... There's certainly a close parallel between the great investment trusts and corporate pyramiding in the 1920s and the mergers, acquisitions, junk bonds and leveraged buyouts in the 1970s and 1980s."

In both cases, the widespread use of debt and a vigorous boom in stock prices briefly created Wall Street cultures where "there was a 'me generation' and a view that it was possible to become very rich very quickly and that, somehow, prosperity seemed unlimited," said Jeremy Atack, a professor of economics at the University of Illinois, now a visiting professor at Harvard. "So I think in psychological terms, the parallels are very close.

"What I'm less sure about is how it will track after the crashes. In 1929, stocks were fairly narrowly held -- only 8 percent of the people had money in the stock market. Now it's much higher. The implication is that the losses are spread much more widely now than they were in 1929, so that the impact on wealth for any individual is much smaller," Atack said.

There are several other important differences between economic circumstances then and now, Atack and other economists said. Following the crash of 1929, the Federal Reserve reduced the amount of money available in the economy, accelerating the economic slowdown. After last October's crash, in contrast, the Fed began increasing the money supply, although whether the Fed will continue its loosening this year in the face of international pressures is a subject of debate.

In addition, liberal economists such as Galbraith believe the growth in recent decades of massive public assistance programs, such as farm price subsidies and Social Security, provide a safety net of income that can significantly support the economy even when unemployment in the private sector is rising sharply.

If the economy avoids a recession in 1988 despite last October's 508-point drop in the Dow Jones industrial average, it will be a historical anomaly. The October panic was the worst in market history and more than twice as severe as any prior panic in which the economy managed to sidestep a recession. Those who believe the economy will avoid a recession this year point to the 1962 market panic for historical precedent.

On May 28 that year, the Dow fell from 611.88 to 576.93, or about 6 percent -- one of the worst market panics since the 1930s, though in percentage terms it paled in comparison to the 1929 and 1987 collapses. But the May 1962 break followed a five-month decline in stock prices, suggesting that the market was signaling a general downturn in the U.S. economy.

It never happened. While the Dow fell to a low of 535 in June, the economy plowed steadily forward, eventually pulling stocks along with it. By the end of the year the Dow stood at 652.10; the next year, in 1963, it rose by more than 100 points.

One difference between the 1962 panic and those in 1929 and 1987 was the absence of excessive speculation in the stock market during the months prior to the 1962 collapse. In fact, margin requirements for individual investors were then 70 percent -- meaning an investor had to put up at least 70 cents cash to buy $1 worth of stock, stricter even than today's 50 percent requirement. (During the 1920s, margin requirements were only between 10 percent and 20 percent.) And there were few financial gimmicks sprouting on the landscape.

"You had a situation where you had a break in the stock market, but federal fiscal policy was being changed to improve the domestic investment climate," said Niskanen. "You had the Kennedy administration introducing investment tax credits and other incentives." One of the changes was to reduce stock margin requirements to 50 percent, which was implemented in July 1962, immediately after the panic.

The underlying health in 1962 of the U.S. economy, which was in the midst of an unprecedented expansion, was the most important reason that the panic did not cause a recession. Similarly, many economists today are predicting that the U.S. economy will be strong enough to muscle through 1988 without a recession. The falling dollar's positive impact on the manufacturing sector, signs that consumer spending has not been crushed by the market collapse, and the Fed's relatively easy monetary policy often are cited as reasons for the current optimism.

"We're far enough away from the crash to make me somewhat more confident that the stock market crash itself is not going to put us into a recession," said Burton Zwick, senior economist at the large Wall Street firm of Kidder, Peabody & Co. "I think the Fed is determined to keep the economy in decent shape for the election."

One unsettling difference between 1988 and 1962, however, is the amount of paper wealth that was destroyed. National Bureau of Economic Research statistics on the economy show that during the last 150 years, there has been a strong correlation between the severity of depressions and the magnitude of the financial panics that preceded them. The biggest panics -- in 1873, 1893, 1907 and 1929 -- have each given way to a deep downturn. Exceptions have been confined to relatively modest panics, such as the one in 1962.

The parallels and differences between the October market collapse and past financial panics are suggestive but far from conclusive, most of the economists and historians interviewed agreed. Forecasting, even based on a thorough knowledge of history, is a highly imperfect business, they conceded.

Said Galbraith: "There are two classes of people who tell what is going to happen in the future: Those who don't know, and those who don't know they don't know."