FINANCE AND INVESTMENT
By CUSTOS
MARKETS have made so many attempts at recovery in recent months, only to run into the brick wall of European politics, that one feels hesitant about even whispering that hope is again lifting its head in Throgmorton Street. The political sceptics will not have it that there is much more in this latest improvement than the lulling effect of spring sunshine, but I think it goes deeper than that. First, the City is feeling rather less anxious about the international situation in the sense that it is hopeful that the strength of the democratic front vis-a-vis the Axis Powers is growing ; hence it is prepared to rate the risk of war rather lower than before. Next, I would cite the return of cheap money as an influence in better markets. With the bill-rate back to bedrock level again, the City is now convinced that Whitehall is not going to commit any kind of financial hara-kiri. So, cautiously, some of the banks have been buying gilt-edged stocks, and there is every indica- tion that, barring political accidents, the disturbing fall of recent weeks is over. Finally, the case for the " bulls " is being reinforced week by week by a steady stream of news from the industrial front which leaves no room for doubt about the strong recovery now under way in domestic trade. The April employment figures, steel output, railway traffics, provincial bank clearings all tell the same story.
Of course, the buying in the stock markets is quite small ; so far, it has represented " bear covering " as much as genuine investment. That, I think, is not to be wondered at after such a prolonged period of tension, falling prices, shocks and disappointments. There is evidence, however, that certain investors are coming to the conclusion that, politics or no politics, there is little to be gained by holding surplus funds in the bank. In recent months the accumula- tion of funds over and above what is necessary to preserve a reasonable liquidity must have run into huge figures, thus constituting a source of potential buying on a really formidable scale. It will be all the better for markets if, as seems likely, the release of such funds takes place gradually rather than in a sudden buying rush. Meantime, I see no reason why investors in search of income should not begin to pick up stock at current prices.
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