IT'S now a year on and the effects of the crash, as far as the stock market is concerned, are over. This will, for many, seem strange as from press reports and the view from the street, times seem pretty hard.
However, the market looks ahead, typically by about a year, so it t tends to be at values based on the next 12 months rather than the current state of affairs.
The market is telling us that by next autumn things will have picked up to a pre-crash,
pre-Lehman Brothers collapse level, which isn't really such a fantastic recovery. This was a level where the credit crunch was already causing havoc under the hood of the global financial world, house prices were already plummeting, times were already bad and the market was well into a bear market trend.
However, the underlying fundamentals will be improved. We will – economically – be looking up a big hill rather than down into an abyss.
However, for investors, what the market is saying now is not of much interest – it's what it will be saying over the coming months that is important. It's the answer we all want to know. Calling the top and calling the bottom is much easier for me than calling the middle.
The middle is a spot where prices are actually fair and as such it is hard to make an argument for a move in any direction. This is where we are now, a churning no-man's land.
We are now post-crash but potentially still in a bear market. So what next? The decision is a simple one: is the bear dead? I think it is. I believe we will have another rally followed by a nasty mini-crash when tightening begins again. This next rally will kick off sometime during the winter and will continue until the central banks slam on the brakes, as they must.
Anyone sat on jumbo profits should "profit take" what they are uncomfortable with and dig in for a bumpy ride. It would be nice to enjoy more months of raging bull but the chances are that volatility will be making a comeback.
That doesn't mean profits won't be excellent, just that there will be days, and perhaps weeks, when the bear will look like it is back.
While the economy looks fragile, the market will be buoyant. The moment the trillions of dollars injected into the world economy start bubbling up into inflation the rally will end. That would appear to be a way ahead, but none the less the end of this historic and gorgeous rally is just over the horizon and it's time to be more cautious.
• Clem Chambers is chief executive of stocks and shares website www.advfn.com.
