Even when it comes to the stock market, the most closely watched numbers don't always tell the story. In 1989 the Dow Jones industrial average of 30 stocks soared by about 25 percent, capping off the greatest decade of stock market performance since the 1950s. And yet, as the year drew to a close, there was relatively little enthusiasm about stocks to be found among investors or stock market analysts. "It is a kind of joyless prosperity," said Ed Mathias, managing director of mutual fund giant T. Rowe Price in Baltimore. "Looking at the markets you would think people would be ecstatic -- but they are not." Ironically, it was only a decade ago that Business Week ran its now infamous cover story declaring "The Death of Equities -- how inflation is destroying the stock market." The report of stocks' demise turned out to have been greatly exaggerated, as the Dow Jones average went on to add nearly 2000 points during the ensuing decade. But by the end of the Roaring '80s, the magazine, exasperated by the seemingly senseless volatility of stock prices, was moved to ask in another downbeat cover story, "Does the Market Matter?" According to the old saw, it is greed and fear that drive stock prices up and down. In recent weeks, however, perhaps the most stunning thing about stock market investing has been the absence of both. There are numerous reasons for this malaise, according to analysts, money managers, brokerage firm executives and investors. While many stock prices bounced back this year from the beating they took in the 1987 crash, the small investor has not returned as a direct participant in the market. As a result, most individuals missed out on this year's rally and Wall Street -- finding itself with too many brokers and too few customers -- has lapsed into a recession, with additional job and salary cuts expected. The Standard & Poor's stock market average of 500 stocks performed so well in the 1980s -- 17.4 percent annual increases versus the historic 9.7 percent annual rise -- that longtime market watchers find it hard to believe such superior performance can continue. Broader measures of stock market performance, such as the over-the-counter market's average of small stock performance, are not up as much as the Dow and S&P averages, indicating the great surge in stock prices this year lacked breadth. Most professional money managers, and those small investors who measure their performance against the broad averages, have underperformed the Dow and S&P, leaving them feeling as though they missed out on the rally. Days after stock prices reached all time highs this fall, the 190-point plunge in the Dow average on Friday, Oct. 13 sent shock waves through the market and frightened small investors. Stock prices have stabilized since but have not recovered all of the ground that was lost. "There was a pickup in interest by individual investors in owning stocks but then when the market got slam-dunked in early October, we kicked the crutches out from under the wounded individual investor and he hasn't really come back yet," said A.G. Edwards market analyst Al Goldman. A slowdown in corporate takeover activity -- one of the major factors that had fueled the rise in stock prices -- coupled with predictions of sluggish corporate earnings in 1990 has raised the possibility that the stock market may run out of steam, at least temporarily. Investor confidence in the U.S. market, as measured by willingness to invest in new stock issues, continued to fall in 1989. The level of new stock issuance fell to its lowest level in four years. The decline was even sharper for the sale of stock in companies that began trading publicly for the first time; after three flat years in the $23 billion range, these initial public offerings of stock plummetted this year to about $13.9 billion. One poignant symbol of the uneasiness concerning the stock market was a New York Stock Exchange advertisement that appeared in The Washington Post and other newspapers earlier this month. The ad was part of an effort to reach out to nervous individual investors by reassuring them that the stock market, which at times has resembled a casino, has important underlying purposes. The stock market is the place businesses go to raise the new capital they need to expand, and the place investors go to buy and sell their shares relatively easily and cheaply, the ad said. It also attempted to show that the exchange was sympathetic to the widely held view among investors that wild stock price swings caused by computer-directed trading were a problem that needed to be addressed. "Excess volatility is a serious threat to our nation's capital markets and the American economy," the ad said. " ... Occasionally investment techniques come along that create excess volatility. That can drive away investors and destroy the main purposes of the marketplace. Restoring confidence is essential to retaining the nation's competitive position in the world." Some money managers find comfort in the cautious mood that surrounds the stock market these days. Martin Sass, who invests billions of dollars in the stock market for pension funds, insurance companies and individual investors, thinks such a mood helps to avoid excesses that can lead to prolonged economic and financial market declines. "Ever since the October '87 crash, we have had this sort of somber mood," Sass said. "And I consider that pretty constructive, by the way. I get worried when everybody is ebullient and feels the sky is the limit." Since the stock market fell 1,000 points from August through October in 1987, many economists, erroneously, have been predicting that the economy was about to lapse into a recession. Sass thinks these predictions have helped to avoid a recession by disciplining business and financial market behavior. "When manufacturers get ebullient they build inventories and you get inventory recessions, or consumers go on a buying binge and companies go on a capital spending binge and we get hyperinflation," he said. " ... Or we go into a speculative spin in the market and you get the overall market running into crazy multiples and valuations and dreams. That ... has not happened. The market is fairly valued. All of those things have kept a sober tone, a cautious tone, and we have that as we go into the new year." Sass is predicting that 1990 will lead to new highs in stock prices, but with a different type of market leadership. If the surge in stock prices this year was fueled by takeovers and the strong performance of consumer franchise stocks such as Coca-Cola Co., he thinks next year will be the year that "reasonably valued, primarily smaller growth stocks" take off. He also thinks stocks of large industrial companies in cyclical industries -- aluminum, steel, chemicals and paper -- will be better performers than the consumer franchise companies that have led the market rise. Sass is not alone. Steve Einhorn, co-chairman of the investment policy committee at Goldman, Sachs & Co., also predicted that industrial company stocks would outperform consumer stocks next year, and that small and medium-size companies would catch up to the large companies in terms of share price performance. Einhorn also thinks stock prices will continue to be supported by takeovers and stock repurchase programs by major corporations, even if such activity cools off. In the last six years, $780 billion of stock, or about one-third of the value of the New York Stock Exchange, has disappeared through takeovers and corporate share buyback programs, he said. This decrease in supply has helped to support prices. Einhorn predicts that another $100 billion or so of stock will disappear in 1990. "My conclusion would be that the market will still benefit in 1990 from an ongoing reduction in equity {stock} supply, just less intense than it was in the last two years," he said. Despite the rise in share prices and the investment opportunities created by corporate takeovers, individual investors have continued to decrease their exposure to the stock market. Nevertheless, Michael Hines, vice president of mutual fund behemoth Fidelity Investments in Boston, said polls of individual investors taken after the stock market "mini-crash" in October showed a surprisingly high level of optimism about the stock market's long-term prospects. "Our customers are very positive about the long-range outlook for the stock market and very positive for the long-range outlook of the economy," he said. "I think that is consistent with the way most Americans feel. When you sell this country short, you've usually been wrong." Hines noted one trend not mentioned by other market watchers that could affect the financial markets next year: an increase in the savings rate. He said that in the third quarter of 1989 the growth in savings exceeded the growth in new debt for the first time since 1982. He said a continued increase in savings could mean lower interest rates and a stronger stock market and economy than is expected. Given the unpredictability of world events and the volatility of the stock market in recent years, predicting future trends is a perilous business. Anyone who sounds too sure of themselves as they predict stock market performance for the 1990s ought to be viewed with extreme skepticism. "I don't think anybody can have a conviction on tomorrow, let alone the next 10 years," conceded A.G. Edwards market analyst Al Goldman. Still, at least one trend seems clear: The increasing dominance of pension and mutual funds, university endowments and insurance companies in stock market activity, and the declining role of individual investors as direct market participants. In this arena, the numbers do seem to tell the story. Twenty years ago, shares of common stocks represented 36 percent of personal financial assets. A decade ago, the figure was 25 percent; by 1989, the percentage had fallen another 5 percent. "You would think individuals would be increasing assets in the market, given what performance has been," T. Rowe Price's Mathias said. "But for a variety of reasons they are not. I think it is the result of a whole pattern of events. The insider trading scandals; program trading; a number of products individuals were sold quite aggressively haven't worked out, packaged products like closed end mutual funds in particular. They have approached it more like a casino then like a long-term investment vehicle. And that is a very difficult game. I think people feel when you get these United Airlines moves from $190 to $300" a share right after they sold, "they feel there is something kind of fishy. "Each time they seem to come back less."