Ignore oil, interest rates and currencies - to our peril

London

THREE months ago, I argued that rising stock markets around the world were a consequence of improving economic conditions, not a sign of "irrational exuberance". Since that commentary was published, share prices accelerated upwards, and some "irrational exuberance" did start to appear, leading to a sharp fall in early February. Although most stock markets are still well above their levels of last November, the question lingers: Did February's reversal mark the end of the bull market, or was it just a temporary correction?

The strongest evidence, as Sherlock Holmes might have remarked, comes from the dog that didn't bark. More precisely, it comes from three vehement "guard dogs" - oil prices, long-term US interest rates and currencies - that slept peacefully through the commotion on Wall Street.