FINANCE AND INVESTMENT
IN a square mile which has been badly ravaged by war scare one must be prepared to forgive a little buoyancy at the conclusion of the Anglo-Italian agreement. Fortunately, the City—in this instance I mean the army of professional speculators—has not jumped to too many conclusions, and so far the rise in quotations has by no means distorted the potential benefits which the new agreement brings into view. Most City observers have decided, I think with good reason, that surface political tension in one sphere has been removed, and are for the moment content to hope that we may be on the way towards further appeasement later in the year. On the strength of this moderate reduction in the political risk they have, again I think quite justifiably, been rather more willing to move out of cash into making modest purchases of securities.
How far and for how long may this improvement be trusted ? Given a period of freedom from fresh political alarms, markets could rally strongly if only America could stage a convincing business recovery. With glorious inconsistency Washington is to launch another big spending campaign to provide the much-needed catalytic agent for inert recovery forces, and few will quarrel with the method if it succeeds in restoring hope to the American business scene. One has only to look at the figures of steel production, freight car loadings and first quarter company earnings to realise how deep the Ameri- can depression has now gone, but I am not yet prepared to say that in a favourable atmosphere recovery could not have gained a firm foothold by the autumn. In that event our own condition would begin to acquire considerable stability, and look much less like the approach to a fair-sized recession. Meantime, while I see no reason for putting one's foot down hard on the accelerator, no harm should come to investors who embark on modest runs at gentle speeds.
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