Something is wrong here. Just when the INC. Index ought to be making up lost ground, its decline has continued apace. What happened to the promise that when interest rates came back down, speculative issues would regain their lost allure? The idea, of course, was that with money more readily available, capital-squeezed companies could acquire working cash through short-term borrowing, and that debt service wouldn't be so expensive as in the past. That seemed sound at the time. And it still does, only Wall Streeters didn't believe it. By early May, many of the companies on the Index simply continued their tailspins, although, like everyone else, their prospects were enhanced by a lessened fear of inflation and by the optimistic views of the economy that budget trimming has engendered.

Those same dynamics helped boost the stock prices of bigger companies, even those with disappointing earnings. Indeed, in mid-May, most market averages went through to record highs. But the INC. Index was nowhere to be seen. It was lost in the depths of its all-time low, shrunk to less than half its former self -- the only average on this page to have chalked up a collective loss from May 1982, and a whopper at that.

Why us, Lord Keynes? As measured by 13-week Treasury bills, going into the second half of the year the government was competing less vigorously with business for short-term funds. With T-bills dropping below 8%, a gap between short-term and long-term borrowings rates developed. That is a divergence not seen for nearly three years, and one that usually has led to a favorable business and stock-market climate. But if the economy is supposedly as good as advertised, especially as induced by May's easing of the Fed discount rate, also below 8% for the first time since August 1978, aren't small companies going to get their share of profits? Judging by the Index, apparently not.

Nor is that Index anomalous. INC.'s average is unweighted. Even exceptionally large dollar changes can't distort the overall result, as they can with the Dow Jones 30 Industrials. Every spring, when a new Index is composed, INC. reaches back a month and "buys" $100 worth of shares of each stock on the new list at the then-available price. For better or worse, INC. theoretically owns thawt position throughout the following 12 months. To determine the change, the dollar value of the portfolio is added up each month. There couldn't be a truer -- or sadder -- picture of market conditions among the country's fastest-growing corporations.

Investors might have been unsettled by the shakeout in software and microcomputers, but they have to be wrong. After all, these little companies didn't do much worse than many Big Board brethren.