When will stock markets turn upwards again? It’s probably already happened.
Calling the tops and bottoms of markets is a mug's game, but it can be enlightening to have a look at influences on investor confidence and get a feel for roughly where we are in the cycle of things.
And at the moment, I think there are plenty of hints that we've passed the bottom and have healthier investment times just ahead of us. Here's why I think so...
Europe back from the brink
Just a few short months ago, Europe was on the brink, with the bears growling about Greece, Italy and Spain being set to topple like cards, one after the other, as each one failed to service its debts. Bond yields were rising, as nobody wanted to lend money to the countries in trouble.
But we're past that, the Greek bailout is going to be agreed any day now, Italian and other bond yields are falling and it looks like the eurozone is going to hang together after all. Sure, we still have a couple of tight years ahead of us when inflation is likely to outstrip wages and growth will be very low. But we're starting to see some daylight again.
Global economy is safe
Doomsayers have been forecasting a hard landing for the Chinese economy, amid understandable fears that its 10% average growth rate over the past 30 years cannot be sustained forever. That's had an adverse effect on commodity prices, on companies that produce and trade in them, and ultimately on the whole market.
But any fears of a repeat of the 1997 Asian financial crisis are far-fetched. Back then, large foreign debts and bubble economies based on real-estate inflation, coupled with the forced floating or devaluation of currencies, battered the regional economy.
But China, with a strong balance of trade surplus, is in nothing like that condition. A slowdown is on the cards, but it's unlikely there'll be anything like a crash.
And even in the heavily debt-laden US, there is growth of around 2.5% forecast for the next couple of years.
Maximum pessimism is past
When was the point of maximum pessimism? Apart from the credit crunch itself, I reckon it was probably August to December last year.
People who were bemoaning the falling value of their houses a year ago are just living in them now, and the "everyone is going to be millionaire landlord" days are long gone. And the people in the pub who used to look at me as if I'm weird and say, "Shares? You must be mad!" have forgotten all about it.
The flight to gold, which has no real worth, appears to have let up as well. After the price powered on up and scraped the $1,900-an-ounce level back in September, it's pretty much levelled off and had been bouncing around going nowhere since. The flow of money into gold looks like it's drying up, and I expect it to start reversing before much longer.
Credit is loosening
Some small businesses are still having trouble getting loans, but in the past week I've had a credit card limit increased and a 12-month interest-free transfer offer, so they're at least trying to lend me money. And, in the absence of a fresh round of European crises, our damaged banks are looking like they're getting back on track.
Shares are on the up
I'm not one for trying to predict things from charts, but it does look like investors are slowly returning to sense and seeing shares in public companies for what they are -- the best long-term investment there is.
The FTSE 100 has been in an intermittent recovery since the depths of the financial crisis, and even the Greek panic only caused a fairly mild dip late last year. Since then, it's been back on the up, and is very likely to breach the completely arbitrary and unimportant 6,000 level before much longer (and we should expect some headlines when it does).
Good shares out there
And there are some great shares out there, whose depressed prices make their dividends look very attractive. As we have recently reported, you can get a good 5% from GlaxoSmithKline (LSE: GSK) these days, and around 4% from super-safe Unilever (LSE: ULVR).
Then there's Vodafone (LSE: VOD), with a forecast dividend yield of around 7%! And perennial favourite Tesco (LSE: TSCO) is still nearly 20% down since its Christmas trading update, and offering more than 4%.
And if that's not a bargain to kick-start the next bull run, I don't know what is.
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> The Motley Fool owns shares in Tesco, Unilever and GlaxoSmithKline.
