The Price of Doubt

"Doubt is an expensive commodity." The Wall Street Journal was talking about the stock market, specifically the investors who had hesitated to buy when stocks slipped to cut-rate prices last month after the Korean war began. By last week the surging bull market had knocked many of the stocks off the bargain counter. In five days last week, the Dow-Jones industrial average moved up 4.20 to 219.23; this week it pushed up nearly another point to 220.21, just 8 points below the peak established before the Korean war broke out. The railroad average did even better: it went to 63.39, its highest point since July 1948.

Traders who had been scared out by the war were now being lured back by fat dividends (which were averaging 8% more than last year's), the prospects for a continuing business boom, and the likelihood of more inflation (see below). As Wall Street saw it, stocks which would rise in price with the general U.S. price level were the best hedge against inflation.