FROM THE ARCHIVES:Less than a year after the Wall Street crash, it appeared that the worst was over, according to this report on the London stock market. But it was a false dawn. – JOE JOYCE
THE STRONG upward movement which developed on Tuesday last continued to the end of the week, and for the first time since the start of the big slump last autumn members of the Stock Exchange have experienced really firm markets for several days in succession. It is impossible to say if the rise will continue, apart, of course, from the temporary fluctuations due to profit-taking. There is, however, a more definite belief on the Stock Exchange that the liquidation which had persisted for so many months has ceased.
The sudden rally is due to the fact that the bears (who, as pointed out on several occasions, had helped to depress prices whenever forced selling occurred) rushed in to take up their stock. The result has been a sharp recovery in the share of practically all the well-known industrial companies, as prices in very many instances had declined to an unduly low level.
The rally has been assisted by a certain amount of public buying. Some brokers stated that they had received more inquiries from clients than at any time since last September, and there certainly appeared to be more buying of sound securities, such as Banking and Insurance issues. In other directions, it was said that markets were firm all round, but that there was no business. One or two members admitted that orders had been received to sell stocks that had rallied – for instance, L.N.E.R. Preid., in order to buy back at a lower price next week.
Briefly, the position seems to be that the slump has ended, and the bears, recognising that their long innings has ended, have hastened to buy back, but, although markets may be generally steadier, there is at present no apparent justification for a continued advance in prices. Contradictory and sometimes wild political rumours were busily circulated, but a very persistent report was that a determined effort would be made by the Government, with the help of one of the other political parties, to deal with the problems of unemployment and the alleged abuse of unemployment pay.
It has been a welcome change after so many months of depression and pessimistic forebodings, to find members in a cheery mood once more, and actually hurrying round – in spite of the severe heat – to execute orders. The next few days will prove whether the steadier tendency of markets is to continue and whether the public is going to take a hand in the present upward movement.
One point should not be overlooked, however: many investors hold shares which were bought at much higher prices than those now ruling, and as soon as quotations rise sufficiently there will probably be further, but perhaps more spasmodic, liquidation. [. . . ]But investors, as distinct from speculators, should buy very cautiously, and not be led into purchasing shares simply because prices are rising steadily.