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The 1980s were a complicated decade for American art. New York was back from the brink of bankruptcy, but gentrification was killing bohemianism. The art market flourished, but it also created a lopsided demand for painting and other market-friendly mediums. Art stars were born, but artists were dying of AIDS. All of this serves as a backdrop for ''Circa 1986'' at the Hudson Valley Center for Contemporary Art in Peekskill. The show features 65 works by 47 artists, made between 1981 and 1991, and was organized by John Newsom, Astrid Honold and Nicola Trezzi: a painter, a curator and an editor. The works are all drawn, however, from six private New York collections, including that of the founders of the art center, Marc and Livia Straus, and their children, Ari and Sarena. [ABSTRACT FROM AUTHOR]