The Dramatic Bull Run is over

March is a month of anniversaries, says Stephen Foley in The Independent. This week marks the first birthday of the "dramatic" global bull run that has propelled Britain's FTSE 100 index to a 20-month high of 4,540, a gain of 38%. It is also four years since the technology, media and telecoms (TMT) bubble, "inflated in a frenzy of buying around the Millennium, finally went pop". Might March 2004 also be remembered as a major global peak for markets?

Stripping out the bubble sectors, share prices are at record levels: an index of global shares calculated without TMT stocks is now 10% above its early 2001 top, while American stocks have also made new highs on this basis. The UK's old-economy stocks are still about 16% off their peak. So far, just six industries, including mining, tobacco and construction, have hit new highs, but several more are close. The worry now is that the global economic recovery looks set to slow. Dhaval Joshi of SG Securities says that last year's rapid growth was due to one-off stimuli: low interest rates in Britain and America prompted "a huge amount of borrowing" as consumers withdrew equity from their homes to finance spending, while the fillip from America's pre-election tax cuts and Britain's public-spending boom is running its course. Moreover, China is attempting to cool its economy by clamping down on bank loans. All this is bad news, given that many global sectors have priced in "a very rosy economic scenario".

US valuations are certainly looking stretched, says Graham Searjeant in The Times. On Wall Street an investment of $100 dollars buys just $3.50 of earned profits and under $2 of dividend compared to a mid-1990s average earnings yield of 5% and dividend yield of 2.5%. Britain's FTSE 100 looks better value. It offers £5.50 a year in earned profits and a dividend yield of 3%. What's more, the earnings yield compares favourably with the yield on government bonds, which is not the case in the US. Nonetheless, if global investors' concerns over valuations take centre stage, the FTSE is unlikely to escape the fallout - London tends to mirror movements across the Atlantic.

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In the meantime, the weak dollar, which will make the reported profits of many major firms "look uninspiring", and the dominance of "stodgy defensives" on the UK market, are offsetting the appeal of attractive valuations, so the FTSE seems unlikely to catch up with its major counterparts, says Peter John in the FT.It could underperform for years, says Grant Ringshaw in The Sunday Telegraph. According to Morgan Stanley, pension funds plan to sell a "staggering" £71bn worth of shares to shore up their capital. Given that Standard Life's recent £6bn sale depressed the market for all of January, this is a "sobering" prospect.