U.S. Business: Wall Street: A Long Look Upward

Wall Street runs two ways—up and down. This fact was recognized long ago by one of the Street's alltime moguls, J. Pierpont Morgan. When asked by a brash young investor for a forecast about how the market would go, Morgan glared down his generously endowed nose, bristled his mustache, and replied: "It will fluctuate, young man. It will fluctuate."

So it always has, and always will. When Morgan died in 1913, the Dow-Jones industrial average, even then the popular indicator of market performance, stood at 81, and investors were happy about it. Last week the Dow closed at 840.53, which would have seemed astronomical to Morgan. Yet there was widespread worry because even that figure represented a 16% fall-off from a moment last February when the average briefly broke through the mystical 1,000 mark.

Since February, the market has mostly fluctuated downward. Now it would plunge by as many as 16 points in a day. Now it would steady, now twitch nervously upward—only to fall again. Market analysts, always ready with reasons, have exercised considerable imagination in explaining the day-by-day declines. Thus, on May 31, industrials dropped 12.97 points, and analysts said the trouble was a peace scare based on rumors about Viet Nam truce talks. On June 29, the average fell 9.30 points, and the drop was attributed to a war scare because the U.S. was stepping up its bombing efforts against North Viet Nam.

This was not as paradoxical as it seemed. What it really added up to was uncertainty about U.S. Government policy. Uncertainty is anathema to investors, and they have felt a lot of it in 1966. The U.S. economy as a whole is still roaring ahead, but inflation fed by war and high Government spending is a constant threat, and there are nagging doubts about what, if anything, Washington intends to do about it.

"Why?" Seeking a degree of certainty, many investors have taken their money out of the market and put it into fixed-interest bonds which, largely because of the Federal Reserve Board's tight-money policy, are offering the highest rates in decades. Chief victims of this trend are the blue-chip stocks, eminently reliable but yielding relatively low returns. "Why," asks Atlanta Broker M. E. Ellinger, "should an investor put money in the stock market and get a return from A. T. & T. at 3½% when he can buy Trust Co. of Georgia savings certificates at 5%?" As a result of this attitude, dollar losses among many blue chips have been staggering. G.M., already hit by Ralph Nader and the auto safety hearings, went from a high of 113¾ last October to a 1966 low of 78⅛ last week; for 1,310,000 shareholders, this meant a total loss of $8.6 billion in the value of their investment. In roughly the same period, the world's most widely held stock, A. T. & T. (which has also had its troubles because of FCC rate investigations), went from 68⅛ to 53, representing an $8 billion loss to 2,840,500 shareholders—most of them small investors.