Finance
Elections and the Investor
WHILE party politicians and their followers are awaiting with keen anxiety the outcome of the forthcoming General Election, and while adherents of these parties are prophesying the good which will accrue to the country if their own particular party obtains power, the investor may, perhaps, be excused for endeavouring to determine what is to be his course of action during the waiting period. It does not necessarily follow that the return of a Labour Government would mean the end of all things so far as prices of investments are concerned, or that a Nationalist victory would mean a long-sustained further rise in securities of all kinds. I think, however, there are probably few who would be inclined to challenge the view that the first effect of a Labour victory would be a slump in securities, while equally a victory for the National Government would probably mean an immediate advance. Jt does not follow that in either case the movements would be of a sustained character, and I am merely referring to ,the possible first effects of the result of an Election because they may determine the course of action by investors during the next fortnight. Those who arc very confident of a victory for the National Party will probably back their opinion by purchasing the securities most likely to rise in such an event, while holders of securities which it is thought might fall at first as the result of a Socialist Government will possibly realise their holdings, hoping to replace some of their stocks at a lower price after the Election.
A LONGER VIEW.
Taking, however, a somewhat longer view, there are factors in the situation which, if carefully considered, may posibly influence the course of investment:buying whatever_ may be the result of the General Election. There is, for example, one point of policy on which probably all political parties are at the present time in agreement., namely, the policy of maintaining as far as possible cheap rates for money, or, in other words, for loanable capital. This, of course, has been a prime factor in maiirtaining a long-sustained advance in gilt- edged securities, and whatever Government is in power it is a factor bound still to exercise a great influence upon British Government and other trustee securities. At the same time I suggest that whatever the result of the Election there are points to be borne in mind which make it not improbable that it may be a case of gilt-edged stocks maintaining present levels rather than of registering a further great advance.
INCREASED EXPENDITURE.
All political parties- at the present Election are pre- senting programmes which promise to entail a con- siderable addition to the National Expenditure, a point not altogether favourable for gilt-edged securities. The Nationalist Government is pledged to very large outlays for the National Defences; and while preparations for the flotation of any large loan may conceivably have the effect of making prices in the gilt-edged market firm for a time, nothing can do. away with the fact that any large addition to the National Debt is scarcely a " bull " point. If on ..the other hand the Socialists were to achieve power it seems probable that if not on measures of: defence-- at least in other directions the National Expenditure would tend to rise, the effect of which would probably be quite as prejudicial to gilt- edged stocks as any large outlays on National Defence.
INDUSTRIAL SHARES.
Then again we come to the question of investments in industrial shares, and this must be a matter of increasing importance to British investors, if only for the reason that most of the Fixed Trusts are concerned with the shares of industrial companies, so that while the investors risk is averaged over a large number of these shares, any general pronounced movement in the upward or downward direction is a matter of considerable import- ance. Now it must be supposed that all political parties really have at heart the well-being of the workers of the country, and the difference between them consists of the means for securing the desired results. Not unnaturally the investor in industrial shares is impressed with the fact that during the past two years there has been a most remarkable expansion in production in this country, • especially in iron and steel, a considerable rise in industrial profits and therefore in prices of the shares, while these- improved conditions have been reflected in the figures of unemployment. It is felt that the Socialist Party, however good their intentions, may by their antagonism to capitalism in all forms, to say nothing of their proposals to nationalise the banks, create such disturbance to confi- dence on their accession to power as to create conditions inimical to industrial progress and prosperity. It may .be, of course, that the Socialists have learned some lessons since 1931, but unfortunately at present no evidence of that fact is afforded by the character of the Election propaganda. I am inclined, therefore, to think that this period of waiting for the result of the Election. may. be marked . by a diminution of activity in industrial shares with some slight sagging of prices.
LABOUR UNREST.
Moreover, whatever political party succeeds in obtaining power, I think that there are one or two points in the 'situation which 'should be borne in mind by investors in industrial shares. On the one hand, and given some revival in international trade, there is every reason for hoping that the expansion already achieved in our • industrial activities and prosperity may make further progress, especially if the course of international and- domestic politics should be of a character calculated to increase public confidence. On the 'other hand, however, it would be foolish to ignore the signs of labour- unrest in several directions, especially, of course, in the coal industry, and perhaps in the railroad industry, while any revival in industrial prosperity is, usually attended by increased demands on the part of labour, either for shorter hours or for higher wages, or for both, and this tendency is the more pronounced when the cost of living tends to rise. ' In view of the declared policy of Labour and Socialists alike with regard to the banks it is, I think, fairly obvious that purchases of bank shares and perhaps of insurance shares will be more or less at a standstill until the Election is over, though I should certainly doubt very much the likelihood of holders of either class of shares attempting. to realise, for the strength of both the banks and the insurance companies really lies in the hold they have in the confidence of the masses of people, a confidence which I cannot think any Government would be anxious to disturb. Indeed, I have no hesitation in saying that no Matter what political party might be in power or however great its majority any. attempt to nationalise the banks of the country.. would result in a remarkably short tenure of office and in a political landslide at a subsequent General Election. ARTHUR W. ItIDDY,
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