22 OCTOBER 1937, Page 55


ARE London stock markets over the worst, or is it safer to assuine that fresh storms are gathering ? Frankly, nobody who is honest will pretend to give a confident answer while the course of Wall Street prices looks like a fever chart. And there are the Spanish discussions, which may easily degenerate into. open arguments, to remind us that political, as well as economic risks are part of the market equation. We may be thankful that London's interest in Wall Street is at least less directly financial than it was three months ago. Losses, some of them very grievous, have been cut and I should say that the volume of American stocks held speculatively on this side is no longer unwieldy.

But Throgmorton Street's interest in Wall Street does not end there. The question which must be resolved is whether business in the United States is really only pausing or entering a major decline. The behaviour of common stocks suggests nothing less than that a major slump is on the way, for earnings yields on shares in companies whose prospects have until recently appeared bright have now risen to 20 or 3o per cent. Either Wall Street is very wrong or the outlook for business is bad. The truth, I imagine, is somewhere between these two extremes, but the situation is now so dangerous that the Administration will need. to act quickly to stop the rot. Meantime, the market in British industrial shares may hold up reasonably well, but it cannot possibly offer much scope for quick profits commensurate with the risks. To the speculatively-minded my advice is to wait a little longer before taking a hand.