Global rally won’t last

published 8 July 2011

Bulls are cheering, says David Rosenberg of Gluskin Sheff. The stockmarket has "fought its way back to where it was a whole five weeks ago". Global stocks had their best week in a year last week, with American and British equities gaining more than 5%. Can stocks keep going?

Don't count on it, says Alan Abelson in Barron's. There was no good reason for the bounce, apart from "Greece's not going under yet". The Greek parliament may have passed its latest austerity package and received more cash, but the crisis is far from over.

Meanwhile, the macroeconomic outlook hasn't exactly improved. Britain continues to struggle, poor retail sales figures are the latest sign of an economic slowdown in the eurozone, as Capital Economics points out, while the US recovery is still "very fragile". With the soft patch yet to work its way through to US earnings, companies are likely to issue subdued forecasts when they report second-quarter earnings. That will temper bullishness. Finally, valuations on Wall Street remain high. All in all, says Abelson, the market's recent lift looks "more like a short-term bounce than a sustainable upswing".