Evening star., 1932-09-11
BY BERNARD S. OHARA.

NEW YORK, September 10-The
stock market has had its most spec
tacular rebound since the business cycle
turned downward three years ago, and
what Wall Street and Main Street want
to know is, does this herald the turn
toward better times?
Time was when the stock market was
widely respected as barometer of the
business weather, but this respect has
been considerably impaired by its be-
havior of recent years. In several eco
nomic depressions of the past the up
ward turn has come in the stock mar
ket f1rst, heralding general alleviation
of hard times, but its record as fore
caster. while impressive, is far from
perfect.
Story of Records.
In the depressions of the 1870S and
the 1905 the stock market led the way
when the economic cycle turned up
ward Business statistics, however, in
dicate that it failed at the outbreak of
the World War to foretell the large VOL
ume Of business which was to fall in
Uncle Sans lap as result Of Europe's
taking to the battle fields, nor was the
stock market able to turn in advance
of general business activity in 1921, 1t
is difficult to go back to 1870, since
business statistics grow increasingly I'M
perfect, as the record is traced back.
But there are still many financial
authorities who pay considerable atten-
ton to the theory that the market can
foretell business improvement. Perhaps
it may be less accurate in sensing the
approach of hard times, for fever of
bullishness such as that of 1929 obvi-
ously blinded spectators to economic
realities.
Going back through the records of
major depressions and panics of the
past 60 years, it is found that the stock
curately toretold business recovery after
completing its own downward readjust-
ment. In one or two instances, recov-
cry In stocks preceded betterment in
business by year or more. this being
true of the aftermath of the serious
economic disturbance which started in
1873. Both stocks and business entered
long downward swing which culml-
mated in 1877, but while securities began
their definite recovery in that year, 1t
was more than year later that bus1-
ness showed signs of coming back to
normal.
In the depression Of 1893, which
carried the stock market and business
steadily downward to the end of 1894,
stocks again led the way through
period of expansion and prosperity, in
terrupted by a comparatively minor
setback in 1896, to peak in 1900.
The market played prophetic role
at the start and finish of the depreS-
sion of 1907, which was aScribed at
the time to a flood of 'undigested
securities" No cloud was visible on the
business horizon when the stock market
started downward in February of that
year, but a few months later the busi-
ness tide was receding at a drastic
rate In December, 1907. in spite of
the absence of tangible signs of in
dustrial recovery, the stock market
started forward and made a consider
able recovery before business began to
evidence returning health in March,
1908.
Market In World War.
The outbreak of the World War with
is dislocation of financial and economic
operations throughout the world had a
profound effect on the business cycle.
A rather severe business depression,
beginning in February. 1918, was pre-
ceded by a downward movement in the
stock market, starting in November,
1912. In pointing the way to recovery
the market failed as a barometer on
this occasion because it did not foresee
the great influx of orders for war
supplies for the allied nations. In any
event. business started upward In jan
uary, 1915, while the stock market