EQUITY SHARE OUTLOOK
What of ordinary shares? Here one must make distinc- tions. If, as one must assume, our war effort is to be raised to its maximum this year, there is going to be a big diversion of public spending power from non-essential goods to Government uses, an increase in the proportion of the nation's productive power devoted to war essentials at the expense of the non-essential trades, and, one may surely hope, an organised drive to expand our exports. In the broadest terms, this seems to me to imply good prospects for such industries as iron and steel, shipbuilding, engineering, cotton and wool textiles, warehousing, &c., and a relatively unattractive outlook for London stores, hotels and other luxury or semi-luxury trades. Already this broad division is reflected in Stock Exchange prices, and I should expect the market in ordinary shares to be highly selective in 1940. Yields in many groups are good enough to attract investment support, and, as has been clearly demonstrated in recent weeks, war has not altogether ruled out the possibility of capital appreciation. I still feel that cotton textile shares, like Bleachers preference, at x Is. with substantial dividend arrears, and Lancashire Cotton Corporation ordinaries, at zos. 9d., should prove good holdings. The burden of taxa- tion will be heavy, but the rise in gross earnings should be sharp enough to enable net profits to cover reasonable divi- dends. * * * *
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