Serious Money: The market price of a share on a daily basis is a reflection of the market's view on any stock. It usually takes a positive surprise or a change in expectations about trading conditions to drive share price performance.

Stockbroking is a fascinating industry to be part of, with the challenge to engage in the process of trying to assess, on a daily basis, not only the fundamental prospects for every company but also to marry that fundamental view to the appropriate valuation for the stock.

All this takes place against a background where the general economic environment is evolving and the markets are being buffeted by the uncertain geopolitical situation in the world today.

The Irish equity market has long been one of the "hot" places to invest and international institutions have generated super returns as they have built up significant ownership positions in the leading Irish stocks over the past decade.

The result is that the international investment community has become dominant in the Irish equity market as Irish institutional weightings in Irish equities have fallen.

The reason for the Irish market being a "hot" and attractive market for international investors was the perhaps justified perception that interest rates in Ireland were unnaturally low, adding fuel to the already strong economic growth that had been experienced in Ireland from the mid-1990s.

The outlook for the Irish economy has been the subject of acres of media coverage. It is instructive to see what the stock market is effectively pricing in. In looking at this, the financial stocks are probably the best proxy for the overall economy and the debate on future prospects being played out is reflected in the share prices of these stocks.

The simplistic view is that, if Ireland was the place to be during times of low interest rates and supernormal growth, it is definitely not the place to be in a time of rising interest rate and slowing growth as the excesses of the past catch up on us. Life though is never that simple.

The Irish financials peaked in terms of their relative performance versus their European peer group this time last year and the underperformance has accelerated this year since the ECB began to raise rates. Despite the strong current economic position, international investors became more nervous and were reluctant to keep buying Irish bank stocks, with the result that the share price performance of the banks in the year to date has been poor.

In May Bank of Ireland released strong results as did Allied Irish Banks last Tuesday. Indeed, for the second time in three months, AIB raised its guidance about its earnings for the current year. The message from the management teams at all the Irish financials has been bullish as volumes, margins and credit quality remain strong despite competitive pressures and rising interest rates.

The Merrion Stockbrokers view is that valuations look attractive with double-digit earnings growth and price/earnings multiples of over 10 times, supported by healthy dividend yield support of about 4 per cent in the case of AIB and Bank of Ireland.

Looking forward, the next Irish financial to report will be Irish Life & Permanent, which has already released a detailed pre-close period trading update that pointed to strong trading in all areas, with volumes continuing to run at strong levels.

So here is the conundrum: the international investment community had become worried about the prospects for Ireland a long time before it became fashionable to worry here and this was reflected in a period of significant underperformance by the Irish financial stocks against their European peers. Now however, just as everyone here is starting to worry about the impact of rising interest rates, higher energy prices and an over-reliance on property and construction, and the consequent potential negative impact of a slowdown caused by these factors, something interesting is happening - over the past month there is evidence that the Irish financials sector is now beginning to outperform its European and British peer groups.

This is only based on a single month's view, but nonetheless it is interesting to note a change in perceptions.

Which view is right? Is the mood of caution creeping in to the public consciousness right and are we are looking at gloomier economic prospects? Or is the market right, having assessed the prospects for the last few months and now beginning to see a brighter scenario in Ireland than had been initially anticipated when rates first began to move upwards?

If I knew the answer to this I would be relaxing on a beach with a Margarita. However, I can say that the Merrion Stockbrokers' view on the financials is positive and that we have been pointing out the underlying strengths of the sector, including the underlying economic environment, for some months now.

Let us hope that the latest market trends are accurate and that not only do the share prices of the financials continue to do well but that the bank sector as a proxy for the investor perceptions of the Irish economy proves to be accurate.

What is important though is that the political powers that be manage the economy with prudence so that the growth and activity levels in the economy remain at healthy, sustainable levels for us all to continue to enjoy.

• Liam Boggan is head of equity research at Merrion Stockbrokers