OUTLOOK FOR SECURITIES.
At the end of last year the Federal Reserve Bank in New York reduced its Official Discount rate from 21 to 2 per cent., and the Clearing Banks in that city brought down n : their rates to a very low level. It is too early yet to say what will be the effect of this policy. Ease in mone- tary conditions, whether in New York or Paris, will not itself do very much to aid the general international monetary situation, but if as a result of a greater feeling of confidence with regard to the 'Maintenance of inter- national peace, and if as a consequence of the poor return offered by the banks on deposits, there should be an outpouring of investment money. by American and French investors in foreign loans it is quite possible that a great improvement might be effected in the general finan- cial position. International trade would be stimulated, and while it would not necessarily be a case of increased monetary ease here there would be a greater feeling-of confidence with regard to the general outlook.
And_this brings me to .a final reference to the possible course of Public Securities during this year. Given normally favourable developments along the lines of an outflow of credits and gold from France and the United States to other parts of the world, I think 'that the year should see some moderate revival in industry, and also a moderate revival in those-industrial securities which ha ve fallen most heavily during the last two years. At the same • time, I consider that these Conditions would not. involve any fresh decline in money rates, but possibly a slight rise, in which case I am inclined to think that British Funds, and other gilt-edged stocks, will keep steady rather than rise very greatly. If on the other hand this year is to see an intensification of all the influences which have been operating during the past year, then it is conceivable that the case in money may raise gilt-edged securities a little further, but I cannot help thinking that in view of the thoroughly unsatisfactory monetary conditions which would be represented the rise could not go very far. In making these very sketchy forecasts and calculations I have, of course, left out of consideration not only such possibilities as international -conflicts, but also the possi= bility of any impOrtant strike movements in this country. In these respects, however, I suggest that the first three months of the year may be trying and perhaps critical
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