A 'frightening' stock market rally

Equities have produced an incredible rally since the March 2009 bottom, but stocks look worryingly susceptible to a nasty reversal.

Equities have produced an "incredible" rally since the March 2009 bottom, says David Rosenberg of Gluskin Sheff. European and British stocks have jumped back to levels last seen two and a half years ago. Meanwhile, America's S&P 500, which sets the tone for world markets, has doubled. Sentiment is as bullish as it gets. Last week, developed-market equity funds enjoyed their biggest inflow for 30 months, according to data provider EPFR.

Strong recent profits and macroeconomic data have continued to point to a strengthening global recovery. Potential problems, such as political unrest and higher oil prices, are taking a back seat. Yet investors assuming that the global economy is returning to normal are missing the bigger picture.

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