FINANCE AND INVESTMENT
MERCIFULLY the City is calm again, but there is inevitably an " after the storm " atmosphere in Throgmorton Street. Last week's ddtdde has wrought havoc not merely with prices but with investment ideas. Frankly, I fear that the political change—by which I mean the obvious diminution of appease- ment hopes—has important implications for investors. To take the gilt-edged market first, quite apart from the immedi- ate Budget possibilities implied by additional rearmament expenditure, it now seems more than probable that some part of the extra strain will have to be met by enlarging the basis of credit. From the purely technical standpoint an expansive policy in Whitehall and Threadneedle Street—I assume that the Chancellor of the Exchequer and Mr. Norman will see eye to eye here—will assist the maintenance of the gilt-edged market, but surely the real inference is that even such a " con- trolled inflation " is bound to bring a rise in the cost of living.
This may be a medium-term rather than an imminent investment factor, but when yields on gilt-edged and other well-secured fixed-interest securities are only 3f to 4 per cent., it should be taken into account. In other words, whereas before the Austrian coup I was feeling happy about ;.he fixed- interest market, I now feel that the prospect, although far from being gloomy, has been smudged, first, by the increase of the war-risk itself and, further, by the fresh financial bur- dens this has imposed. I look, iherefore, for a gradual ad- justment to a slightly higher yield basis over the next few months, although not on a scale which would justify complete abstention on the part of those seeking income in this field.
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