Since early October, the MSCI World Equity Index has climbed more than 10 per cent. Does this development in global equity markets represent the start of a more secular improvement? Or, if not, what further catalysts are required to boost markets?

For most of 2011, global investors were concerned primarily about five major risks; the possibility of the US returning to recession, the risk of a Chinese "hard" landing, the combined risks of a failure in the eurozone capital markets and the associated threat to eurozone banks, and finally the negative outlook for corporate earnings.

Consequently, 2011 was characterised by investors running high cash levels and focusing on perceived safe havens such as G4 government bonds.

In the past three months, there has been a slow movement in global capital flows in favour of corporate and high-yield bonds and into high dividend underleveraged cash rich defensive equity sectors. The outperformance of defensive equity sectors relative to cyclical stocks has been significant in recent months. This change in investor behaviour has partly been due to frustration with low money market yields and the perception that official rates will stay low for a sustained period. But it is also due to a changing risk profile in markets.

There has been a clear reduction in recession risk in the US while the probability of a hard landing in China has decreased. The US ISM manufacturing index has improved to 53.9, the non-manufacturing index has recovered to 52.6 and the University of Michigan confidence index for January rose to 74, all data consistent with real gross domestic product growth of approximately 2.5 per cent.

David Fuller's view The market views expressed in this column are generally in line with the opinions that Fullermoney had been developing since October, when the fashionable consensus was bearish, and therefore a useful contrary indicator at a time when support building was becoming apparent on the charts.