15 NOVEMBER 1935, Page 35


After the Election

IT is good to know that by the time this article appears in print the General Election will be a thing of the past, far, quite apart from the .disturbing effect upon business always produced by a General Election, the event has had the effect of diverting attention from other matters Probably calling for more serious consideration than the Election itself. For the moment, however, and during the excitement of the contest, it is held to be the one supreme factor, and dUring the past fortnight it might have been supposed from the general tenor of conversation in the City that the whole future of this country for the next four or five years must depend upon the result of the General Election. When once the Election is over, ,nowever, I cannot help thinking that a wider view will be taken of the whole situation and, among other things, I should not be surprised if attention shifted from local to international politics.


It is partly on that supposition that I propose to make a few observations with regard to the possible course of markets during the weeks following upon the Election. In the most improbable event of the return of a Socialist Government, I find no difficulty in forecasting the effect both upon business and upon public securities. Rightly or wrongly, the result would be to occasion • a degree of distrust and anxiety sufficient to give an immediate and material set-back to business activities and to cause something like a slump in public securities. Row long such conditions would last would, of course, depend somewhat upon the character of the new Ministry formed and the policy pursued. If, on the other hand, the Nationalist Government were to be returned with all overwhelming majority, I do not think that the effect would be quite so good as some people" nnagin.e, because while the many difficult problems which have to be faced in the near future may make it desirable that whichever Government is returned should have a Very clear mandate from the people, the magnitude • itself of the problems seems to make it desirable that there should be something more than an effete O pposition. I cannot help thinking, therefore, that at the present juncture the ideal result of the Election Would be a clear majority for the Nationalist Government of, say, 150 over all other parties, apd for those other parties to contain a greater number of Liberals than in the Previous Parliament. Assuming, however, that some such ideal conditions were to result from the Election, I venture to think that there are still reasons for believing that the situation is not altogether one which suggests a elistained great upward movement in prices of securities, and for this view I would offer the following reasons.


I believe that when once the excitement of the General Election has passed we shall find that the international Outlook is one which may well give cause for a certain amount of anxiety. The Abyssinian War is still in full progress, and the power of the League of Nations as expressed in the system of Sanctions has yet to be tho- roughly tested, while upon its outcome may very largely depend the prestige of the League. Nor is anxiety with regard to international politics confined to the•Abyssinian War; for the outlook in the Far East is of a somewhat disturbing character, while not merely the arming of Germany, but the spirit of dictatorship and militarism in that country seems to grow daily. Moreover, and Without necessarily questioning the desirability of strengthening our Defences, the fact remains that the general atmosphere created may be one increasing rather than diminishing general apprehensions with regard to the International outlook.


Again, there seems every reason to believe that the pause which has taken place now for some considerable (Continued on page SM.)


'(Continued from page 835.) period in the creation of new issues of • capital, and especially those of the trustee order, may give place to con- siderable activity in those direetions, while if the Govern- ment should finance its Defence and Housing requirements through the medium of borrowing, we may have a good many loans of a Government, or semi-Government charac- ter. Doubtleis if such is the case, We 'Shall find that the policy of cheap money is steadily •pursued, but, all the same, any very large addition to Government .and other loans must, one. would think, have at least a restraining effect upon the rise in gilt-edged securities, howeYer much the market may, in the first place, be affected by, cheap money and preparations.. for new loans. A further point which, though a small .one, has to be borne in mind, is that we are approaching the period of the year when realisations not only of speculative commitments, but of actual holdings of securities too, for end of the year balance-sheets, is usually witnessed. This is a process which usually terminates during the last Stock Exchange account of the. year, when not-infrequently it.,is succeeded by a good deal of buying on New Year hopes.


Yet another point, however,. which has to be borne,. in mita in gauging prospects of the Stock Markets after the Election, is the diversion of attention which is going on just now from Home securities to the shares of .American industrial and utility companies. - Most of the measures adopted by the United States authorities to 'bring about improved conditions in that country have been of a character tending in the direction of inflation, and, what with record gold holdings, record cheap money and record stores of credits in the banks, it looks as though the stage was set in America for another great boom in Wall Street. Nor, perhaps, will the authorities in that country be too eager to curb the spirit of speculation and rising prices with the Presidential Election taking place in the . autumn of next year. That the Budgetary position six;. the (Tinted StateS is an unfavourable one is beyond ques-1 flop, and jt is difficult to see how heavy taxation can be: averted if a Budget equilibrium is ever to be established,. Nevertheless, it may be doubted whether those matters;. willbe taken vigorously in hand during the year of the Presidential Election, and should the boom in Wall: Street .growt0,: large dimensions, its effects may be far- reaching and would probably be regarded here with.? considerable. apprehension in view of what happened in: 1929.

Doubtless in yisualising these possible developments, during the coming months I shall be accused of taking a pessimistic view of the outlook, and the accusation may; conceivably be justified. Nevertheless, I am constrained: to present these possibilities at 'this moment to readers • of The Spectaloi because the probabilities seem to favour,: the likelihood, first, of victory at the forthcoming Election for the National Government, and, secondly, a sharp; rise in prices on the Stock Exchange immediately following, upon the Election result, though to some extent even an immediate rise in prices may be restrained by realisations' on the part of those who have bought speculatively in anticipation of the event. What, -however, I have tried to show is that the outcome of the General Election cannot! in itself determine a speedy and satisfactory solution of r the many problems which have to be faced in the near. future, though conceivably a strong Government may weU constitute a reason for hopefulness that in due.., course the problems will be handled skilfully and;'