from rising prices. In a recent period of 10 years, the yield of assets in 5 investment trusts (largely invested in common stocks) was 8 per cent against a 3 per cent yield for bonds.
In the 1960s the experience may not be so fortunate: yields on common stocks are already below those on bonds. But note that with commodity prices rising by 20 per cent, a gain of common stock prices of only 40 per cent (3 per cent a year) in the 1960s would (with equities equal to 50 per cent) protect against rising prices.
The record of book and market values as of June 30, 1958, does not suggest as large gains from investment in common stocks as adumbrated above. Market value of all investments is but 27 per cent, and for common stocks 89 per cent, above book value. The rise in the value of common stocks is less than that in prices, and since stocks are but one-half of investments, the offset is less than one-half. Part of the explanation is that investment in common stocks was much less in 1940 than in 1956; part is that to some extent book values are inflated as a result of revaluations and sales of stocks and reinvestment in others, and hence the difference in book and market value does not reflect fully the rise of stock prices. A final point is that in the years 1940 to 1958, the yield on common stocks exceeded that on Aaa bonds by 41 per cent. This is an important contribution to the neutralization of inflationary forces.