(FORTUNE Magazine) – On the face of it, you'd be silly not to be buying stocks nowadays. Corporate profits are swelling, and the economy is starting to boogie. The easy alternatives to equities, like bank CDs, offer a boring 3.5% in interest. Besides, courage in the stock market has been handsomely rewarded lately. Over the past six months, the market has returned 12.3%. But now it may be time to move more cautiously. Wall Street's market seers say that the bull could trip up in the months just ahead and possibly take a fall of up to 15%. That's no cause to dump your shares and run, but it may be good reason to stash new money elsewhere and prune the most overvalued shares from your portfolio.

Much of the concern is based on how stocks have acted in prior economic recoveries. Start with earnings. Analysts polled by the IBES data service in New York expect companies in Standard & Poor's 500-stock index to log a 24% increase in earnings in 1992. Common sense would tell you that when companies report such gang-buster gains, the price of equities should rise. But it just isn't so. As the chart shows, good earnings reports frequently coincide with poor stock price performance. The expected earnings gain for 1992 suggests that the rest of this year could be a downer. Russell Walter of Omega Advisors, a New York City hedge fund, attributes part of the perverse reaction to the stock market's anticipatory habit of mind. Because the market tends to look ahead six months or so, it anticipates profits and prices stocks accordingly. Much of the good news about earnings is already reflected in stock prices, says Walter. ''When good numbers finally appear, the market responds like Peggy Lee -- 'Is that all there is?' '' The other sticky problem for stocks in an economic recovery is rising interest rates. Though no such trend is in sight, it might be before long. Increasing industrial production might well lead to an interest rate hiccup, says Michael Sherman, a market strategist for Shearson Lehman Brothers. As the economy recovers, companies tend to build inventories. That requires capital, which in turn tends to lift short-term interest rates. Says Sherman: ''This is going to happen again, probably toward the end of the year.'' The blip in rates usually lasts only until companies have brought their inventories in line with sales, a process that typically takes three to six months. But that's enough time for a bear hug on stocks. The bull market faces even more serious problems resulting from its rapid rise. One of the scariest is the puny dividend yield on shares, lately averaging 3% for companies in the S&P 500. That's lower than it was in 1929. Stocks tend to run into trouble once the dividend yield drops much below 3%. Perhaps the biggest threat to the bull is as yet unknown. This is an election year, and an unusual one at that. Undeclared candidate Ross Perot has ^ introduced a disquieting uncertainty into a campaign that was supposed to be a cakewalk for George Bush. Market analysts worry about the election being thrown into the House of Representatives, political instability and alienation, and what Perot, a maverick, might do if elected. In early 1962, John F. Kennedy, far less a maverick than Perot, was in the White House with the economy moving through a recovery, much as it is now. As is the case today, stock prices were high and dividend yields low. When Roger Blough, the boss of U.S. Steel, tried to raise prices in the spring, Kennedy blindsided Wall Street by strong-arming Blough into rescinding the increase. Aghast at the prospect of price controls, Wall Street fainted: By midsummer, the S&P 500 was down 21%. Nobody knows what Perot might do as President, but one thing is certain: He'd be full of surprises. With all these worries surrounding the market, should you be in stocks at all? Yes, say the strategists. As treacherous as the market's course might be, there is plenty of underlying economic strength to keep any market correction manageable. One positive indicator is the relationship of the S&P 500 market capitalization to the U.S. gross national product. According to statistics compiled by the Leuthold Group, a research firm in Minneapolis, the S&P 500 market cap equaled 72% of GNP in the first quarter of 1992, well below the median value of 89% for the period 1926 to 1992. In 1929, by contrast, the S&P 500 equaled three times GNP. In the view of Byron Wien, strategist at Morgan Stanley, ''The market doesn't have to come down hard. It will just be a struggle to go higher.'' Such is the tone of today's optimism.

CHART: NOT AVAILABLE CREDIT: JIM MCMANUS FOR FORTUNE SOURCE: OMEGA ADVISORS CAPTION: AS EARNINGS CLIMB, STOCKS DECLINE Since 1960, when earnings rise 20% or more over 12 months, stocks fall 2.3% over the final half of that period.