Finance—Public & Private
The Investor and Sterling
A SIGNIFICANT change which has taken place in the Stock Markets during the past week or so illustrates the danger, in investment, of always adopting the obvious conclusion and following the prevailing fashion. It will be recalled that the abandonment of the gold standard in Great Britain, and the consequent heavy decline in the exchange value of the pound, was followed by a very sharp rise in quotations for British industrial shares. It was then argued, with some show of reason, that a lower value for sterling would discourage imports, and at the same time stimulate home trade by providing British manufacturers with an export bonus. Both investors and the Stock Exchange were far too occupied with this aspect of the situation to pay much attention to the circumstances which had 'driven this country off gold, or to the wide questions which that development involved. But the economic forces which have been at work are not to be gainsaid, and it may now be noted that, although further heavy depreciation of sterling has occurred during the past fortnight, industrial shares have failed to respond, and have; indeed, tended to decline rather than improve. Not only have markets had continual doses of the exchange bounty stimulus, but, superficially, at least, some events in this country since the abandonment of the gold standard would appear to have been favourable to industrial ordinary shares. The General Election, for instance, resulted in the return of a National Government with an unprece- dented majority, and one of the first measures passed by that Government has been the Abnormal Importations (Customs Duties) Act, under which " anti-dumping" orders have already been made. British industry, then, has the possibility of a long period of freedom from politi- cal disturbance, and a first instalment of the import duties for which many sections had been hoping. In view of 'these additional favourable factors, why have industrial share prices failed to respond to the stimulus of a depreciated exchange ?
Previous page
