Global market rally may not be irrational

ECONOMIC activity over the past few months has plummeted to levels we have not seen in my lifetime, both in Singapore and globally.

Despite this, the global stock markets are in the midst of a remarkable rally. For the first time in history, a bear market, defined as a 20 per cent or larger fall, was followed by a bull market, a 20 per cent or larger rise, in consecutive months. This happened in March and April.

Since then, stock markets have continued climbing steadily, even as everyone agreed that the world was entering its worst recession since the Great Depression. In Singapore, the Straits Times Index has risen more than 400 points from a nadir of around 2,200 points at end-March.