THE tide has finally turned. This seems to be the overwhelming conclusion of many people whose careers depend on analysing such things, and judging by the FTSE 100's 25 per cent rally since the low point in early March and the green shoots of economic recovery, for now they might be right.
But with the UK economy still officially in recession and unemployment still rising, are investors kidding themselves that the crisis is over?
For the first time since the crisis began, investors have brushed aside bad news that had the potential
to damage confidence. In the first quarter, the Japanese economy shrank at its fastest rate since records began. Germany suffered a similar shrinkage, contributing in part to the Eurozone's highest rate of unemployment for a decade in April at 9.2 per cent.
The outlook for the heavily indebted UK economy has been downgraded by Standard & Poor's; the US Federal Reserve has lowered its expectations for growth and raised its expectations for unemployment; and two of Detroit's big three, Chrysler and General Motors, both symbols of America's industrial might, have spluttered to the hard shoulder. But still shares rise.
The changing mood has come about with a shift in "leading" indicators – that is, data that economists know have tended to indicate the future direction of the economy. Investing only on the basis of "lagging" indicators such as GDP, inflation and unemployment is like looking in the rear-view mirror of a car; they are backward-looking and slow to be published.
Shares began to rise on the view that we have passed the most critical point of the crisis and the banking system has begun to stabilise. Banks have begun to repay the money lent to them to plug the holes in their balance sheets and they have resumed lending to businesses and consumers.
Among the economic green shoots are business surveys indicating new orders are finally picking up and manufacturers are stepping up their production. Prices of industrial commodities such as copper, coal and oil are rising, with increasing demand from the Far East, and as a result shipping costs are rising as the cogs of the global economy begin to turn again.
It might not be time to dust off the vintage champagne just yet. The market recovery has only returned share values to the same point they were at before Lehman Brothers collapsed almost six months ago and even the most optimistic forecasters are cautious about the future.
But with the changing mood, now is a good time to think about how you might position your investments to take advantage of the early stages of recovery and protect against the risks that undoubtedly remain.
Two big questions I am often asked are "what should I invest in?" and "when should I invest?" Fortunately for investors, the answer to both those questions is much simpler than the complex problems they are protecting you from.
A little of everything is the quick answer to the first. Having a little exposure to a lot of different investments, diversification, is a well-used method to dampen down some of the more extreme ups and downs of the market. If this sounds complicated, the good news is that there are many fund managers who will do this for you. And if that manager is able tactically to change your balance of investments to take advantage of the natural cycle of winning and losing assets over time, all the better.
Timing is the other big worry for investors and again the answer is simple. If you have money invested, try to avoid the temptation to dip in and out of the market. Market timing, as this is called, is notoriously difficult to get right consistently and it is therefore better, certainly simpler, just to stay invested.
If you are looking to make a new investment, but don't know when the best time is, try making regular savings. Doing this will mean you buy at the highs and lows as prices rise and fall. Over time, the prices you buy at will average out and you will tend to do at least no worse than those who try to time their investments – crucially, without the worry.
Doing both of these things will mean that if the tide really has turned, you will not be left high and dry.
Rob Fisher is head of UK Personal Investments at Fidelity International