DESIGN FOR INVESTMENT.
If there is one thing that does seem clear, it is that a propor- tion of investors' funds should be held in the fixed-interest group of securities. Money may seem abnormally and even artificially cheap but there can be no doubting the power of the authorities to keep it so, and their desire to use their power freely. Budget problems in April may cause a little hesitancy in the gilt-edged market, but I do not foresee any definite setback in prices on that account. Sound fixed-interest securities, in which I include a wide range of well-covered industrial debentures and preference shares, should prove worthy holdings for 1938. Investors must choose within this group according to the income return they are seeking and, of course, with reference to the degree of risk they are prepared to incur. I shall continue to give lists of suitable preference shares from which a choice may be made. What of ordinary shares, and, more especially, of the wide array of equities usually described as home industrials ? The answer, as I have emphasised in these notes for many weeks, depends on the course of events in the United States. If, as I anticipate, America does succeed in getting back on to the road to recovery by the middle of the year, it is a safe assumption that we shall see some recovery in commodity prices, and, by the same token, British industry should be able to maintain its export trade. To would-be purchasers of speculative ordinary shares, whose prospects are closely bound up with a further broadening of recovery, I advise caution at this stage when recovery is so obviously in the balance. The key barometers are business activity in the United States and commodity prices, and neither is showing just yet any decided movement one way or the other. * * * *
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