FINANCE AND INVESTMENT
IT is becoming clearer every day that given any really reliable basis for confidence in the international political out- look City markets would be well on the way to a full-sized recovery from the 1937-38 setback. Domestic trade news is good, the inventory position is sound, even the huge De- fence borrowing programme can be tackled without any disastrous effects on gilt-edged prices, so that apart from the Great Unknov, n of European politics, one would now expect not merely strong investment support but a revival of specu- lative interest in the stock markets. As things are, only the hopeful element, who are prepared to take a chance on the war risk, seem willing to move money into investments, a course which, as I have latterly stressed in these notes, is perfectly reasonable and likely to justify itself even if political hopes are falsified by events.
Let me recapitulate the arguments in favour of invest- ment for income—not capital appreciation—in present con- ditions. If all goes well internationally those who buy now will not only have purchased on an attractive yield basis but will also see a handsome rise in capital values. If the future brings merely an indefinite prolongation of tension, I can see no advantage in forgoing income, especially when uncertainty is already well discounted in current market prices. Nor is there much to be said for holding off in anticipation of one more crisis before a settlement is reached. I should be surprised if many of those who take this view will be prepared to act on it if and when the next crisis occurs, and in any event it seems doubtful, unless the crisis is , genuinely grim, whether prices will come back very far. There remains the possibility of a major war itself. Again I find it hard to believe that, subject to the preservation of reasonable liquidity, the investor with well-chosen equities will fare any worse than the man with a balance in the bank —and he would be getting income.
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