In stock markets, economic reality is suspended

IF EQUITY markets were forward-looking, anticipatory mechanisms, then it would seem as if the world would have little to worry about.

From the low of March 23, the broad US stock market based on the S&P 500 and the technology bellwether Nasdaq Composite Index have both risen by over 32 per cent. In Europe, the pace of appreciation has been more varied, but still relatively robust. The FTSE 100 counts its low similarly on March 23; it has since risen by about 20 per cent. The German DAX index hit its low on March 18 and has since soared by 31 per cent. Singapore's Straits Times Index has also risen since mid-March, albeit by a more moderate 15 per cent.

All that has occurred amid growing evidence that the recession currently engulfing the world is unlike any we have seen before. It is estimated to be twice as deep as that in 2008to 2009, and recovery could be protracted. Swiss Re group chief economist Jérôme Jean Haegeli told journalists earlier this week that those who still cling to the expectation of a V-shape recovery are "delusionary''. "It won't happen,'' he said bluntly.