Show I BUSINESS and end the STOCK MARKET by BABSON'S REPORTS Copyright 1972 QUARTER FOURTH INVESTMENT PROSPECTS For most of August and much of September September Sep Sep- a drifting pattern prevailed in inthe in inthe inthe the stock market with wilh a net trend on the downside The Dow Industrials and Rails Ralls followed this pattern while the Utilities displayed surprising strength for a time only to drift downward a a- gain Volume was average until near Labor Day when investors turned to recreational activities and trading dropped dropped dropped drop drop- ped off sharply Brisker Activity Ahead As we move along in the early part of the fourth quarter it appears that more vibrant stock market action lies ahead At the present time there is a good deal i of apathy among investors generally apparently a result of the numerous numerous num num- erous uncertainties existing in this country country country coun coun- try and throughout the world today Chief among these are the war situation situation situation situa situa- tion in Vietnam and the uneasy psychological psychological psychological psycho psycho- logical mood that always precedes a Presidential election While a peace settlement settlement settlement set set- in Southeast Asia is possible before the election it is unlikely that the North would hand President Nixon a gift like this to support his campaign On the other hand if the polls continue to show Senator McGovern lagging badly badly bad bad- ly the North Vietnamese might not feel any further need to withhold their trump card Thus if they sincerely want peace they might adopt a more reasonable posture toward settlement Effects of Election Investors must of necessity eye the election warily While President Nixon would seem to be far ahead the possibility possibility possibility pos pos- still exists that McGovern might come out on top Though he has modified modified modi modi- fied some of his the sky concepts his position on a number of questions is still somewhat to many especially es es- especially Investors and share owners Another area of doubt even before the election is the possibility of a change in wage wage price price policies if inflation fires begin to heat up again It is easy to see sec how such uncertainties have made many particularly investors the smaller ones- ones adopt a cautious attitude While institutional institutional leaders have been active individuals individuals in in- have tended to stick to the sidelines However if one or more of these nagging problems were to be suddenly suddenly suddenly sud sud- denly resolved it could well be the signal for a renewed pickup in investment invest invest- investment ment activity After all it should be kept in mind that the economy looks quite healthy Effect of Outcome at Polls It is difficult to correlate numbers as expressed by the Dow Jones Averages Averages Aver Aver- ages with the stock market as a whole These however are arc widely followed followed fol fol- fol lowed and carry considerable psychological psycho logical weight Thus the Research Department De De- Department of Babson's Dabson's Reports suggests that the indexes for the fourth quarter will show more backing and filling by the tho stock market This will probably persist until election time Then if Nixon turns out cut to be a timer second-timer we would expect a strong sUong post election rally one which might join forces with the traditional upward move often seen seep at nt year end Movement of Individual Issues One flaw that has characterized stock market performance in 1972 has been lack of breadth In other words price trends have been dictated by com comparatively para few issues principally in the highflying high high- flying group These have risen to exceptionally high levels as expressed ex ex- pressed by their price price earnings earnings ratios On the other hand the called so-called cy experienced less participation may be termed Issues selling on the basis of their relationship to the state stale of the economy or separate parts thereof Hence a vitalized econ econ- omy could generate more interest in these types Rather than anticipating vigorous improvement for the stocks in the fourth quarter we would expect that a great deal of investor attention will be directed toward the basic industries with some Some om rotation of market leadership among industry groups from time to time |