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That probably marks the top of the bear market rally. Markets generally soften and show a little volatility before turning down. There are, on balance, still far more reasons to be negative than positive about the outlook.

Euro disaster

Take the 3.8 per cent fall in first quarter German GDP, the worst slump since 1990, or the 4.4 per cent year-on-year contraction for the whole European Union. Nominal GDP in the US has fallen for two consecutive quarters for the first time in over 50 years.

Banking spreads like three-month Libor have come down from five per cent last autumn to one per cent. But there is the considerable risk of a European banking crisis brewing up which could easily reverse this expensively won progress.

The stock market rally has been a self-generating piece of good news with little real substance. Banking profit recoveries in particular are a nonsense of accounting, while the outlook for bank profits going forward looks very grim.

It would indeed be surprising if the massive government spending programs, lower oil prices and lower interest rates had not managed to produce some kind of break in the fall.

But having dropped off the edge of a cliff last autumn global economies are clinging to a ledge, and most probably still have further to fall. Just because that fall will be somewhat less than the fall last autumn is not really much cause for celebration.

An Abraaj Capital executive has commented that long-term investors might find value towards the end of 2009. That sounds realistic without being too definitive.

Cash alternative

In the meantime, there is a good argument for switching some cash holdings into precious metals while prices are at levels that can not hold for much longer. For investors who prefer to deal in certainties than hunting for green shoots of recovery, this is a solid choice.

What we do have as a known-known is that governments are effectively printing money for the first time in decades, and we know that when this has happened in the past inflation has always followed. Gold is a currency with a fixed supply, and will appreciate, and silver prices generally follow at twice the rate of increase.

This explains why precious metal prices are rising and should continue to do so as these hopeful green shoots turn out to be misplaced optimism.