NOW COMMENCING its sixth year, the long rise of the American stock market has become one of the great booms of financial history. Stock prices have reached altitudes responsible for an epidemic of nervous indigestion among investors, as they brace themselves for the inevitable fall-back. But, high though it has climbed, the market still isn't quite as high as it was in the late 1960s.

One day in December 1968, the Dow Jones Industrial Average of 30 big companies' stocks closed at 985. Corrected for the massive inflation since then, that would be the equivalent of 3150 today. In fact, the average is still a little short of 2700. Perhaps the market in 1968 was a bit overpriced, but the present level does not break new ground. Stock prices are still recovering from the damage done by inflation in the 1970s.

The reasons for the present surge upward are not entirely clear, but that's not unusual in a speculative market. One important factor, new in the past five years, is certainly visible -- foreign investment. Money managers in Japan and Europe have been enthusiastically buying American stocks. The attractions of the American economy still apparently outweigh the risks of the dollar's falling exchange rate.

But it's the relationship with inflation that makes the current boom interesting. Up until 15 years ago, it was conventional wisdom that stocks were inflation-proof. They represent, after all, ownership in real assets -- factories, machinery, inventories. Those values ought to be constant, regardless of an inflating dollar. But it didn't turn out that way.

Inflation disastrously skewed and disoriented companies' accounting, confusing real profits with mirages created by an unstable currency. Most of the government's early attempts to fight inflation, beginning with President Nixon's disastrous price controls, were bad for industrial performance. By the summer of 1982, when the current boom began, the Dow Jones Industrial Average was less than one-third its 1968 value. The boom started at a point at which inflation was coming down, rapidly and convincingly, and the chief threat to the boom now is the evidence that inflation is beginning to accelerate again.

This boom is said to have generated $2.2 trillion in new wealth for stockholders. It would be reassuring to think that some of that money was going into industrial development. Individuals can get rich by financial manipulation. But that's not how large countries raise their standards of living