WALL STREET: Bull Market’s Birthday

The current bull market in securities had a birthday this week. The present advance, born April 28, 1942, is now 28 months old—the third longest bull market since 1897.

This bull market—even in its most thrashing moments—has stayed off the front pages, although it has plodded quietly but steadily up. The New York Stock Exchange’s daily transactions have averaged only 906,000 shares, compared to the 1.6 million-share days of 1936.

But pricewise, the Old Bull’s achievements have been notable. Items: 1) the market value of listed stocks has risen from $31 billion to more than $52 billion; 2) the market value of listed bonds has soared from $58 billion to $102 billion. The biggest advance among bonds has been scored by the second-grade rails, thus adding substantially to the earnings of those banks which stubbornly clung to them when prices were lower.

The current upswing has largely subsisted on a diet of cash—the old-style margin account is out of favor. Measured by brokers’ loans, borrowed money in the market now totals only about $786 million, of which about one-third is being used to buy government bonds. In February, 1937, when the 1934-37 bull market was 31 months old, brokers’ loans were above $1 billion.

Pressure of idle money seeking higher returns from dividends and interest has been the principal factor in the rise. Percentagewise, the market value of listed stocks has advanced 67% since April, 1942, as compared with a 10% rise in the Cost of Living Index of the Department of Labor. Hence, when compared with the rise in controlled prices, the advance in security prices has been substantial.

As yet, higher security prices have not been accompanied by the usual flow of new stock issues. Industry is handling its expanded volume of business from its own resources, its commercial banks, and on government money. Only $345 million of new capital issues were put on the market during the first seven months of 1944. And of this amount, only $129 million was raised through the sale of common stock.