Remember the threatened world economic slump? It was what we were all worried about for the last few months and it was enough to send stock markets worldwide into a tailspin. Suddenly, sometime in October, the fear of a major downturn disappeared, stock markets recovered strongly and the sense of crisis dissipated.
However, it would be most unwise for investors blindly to believe that markets have now resumed their inevitable upward march, as shown by the mid-week market wobble we have just seen. Most of the factors which worried the markets back in late summer and early autumn remain with us, even if the overall environment is a good deal calmer. The Japanese may have come up with a plan to rescue their banks, but that economy remains deeply depressed, as does much of the rest of Asia. And the damage to the international financial system remains - there may still be some shocks to come along the lines of the US hedge fund collapse earlier this year.
As this week's wobbles show, all it takes to send markets downwards sharply is some whiff of bad news - particularly as many stocks in the US market remain very highly valued. They may think the crisis is all over in the markets. But the fragile state of investors' nerves leaves markets vulnerable to more problems ahead.
