"Our experts think that equity valuations now look attractive."

- From a Fidelity advertisement in the FT, 2 - 3 February 2013.

You may want to frame that one. As always, only time will tell. But on the basis that it makes sense in general terms to buy low and sell high, how should we view the current behaviour of the S&P 500, for example ? Financial analyst and commentator Doug Wakefield has published a chart summarising the last 13 years of the benchmark US stock index with some helpful notation

David Fuller's view A contrarian thinker who is long equities will not be reassured by the promotional quote cited by Tim Price above.

Eoin and I have been saying since late January that a global stock market reaction was imminent. We also think that it could easily extend to a correction of over 10% for some indices. However, there is a reasonable chance that this global stock market setback will not be too severe, despite overextended charts and higher valuations, because investors are less terrified by Europe and the euro; China has not had the hard landing that many forecast; Japan is recovering at long last, and the US economy should avoid a recession in 2013, despite the awful politics and ballooning government debt. Last but certainly not least, monetary policy remains a considerable tailwind.

I also think Tim Price underestimates the potential impact of even a small move away from bonds and into equities. I have witnessed this process on other occasions during my financial career of nearly 50 years to date. The fact that many pension and endowment funds currently have their largest weightings in bonds since WWII, all but guarantees some rotation towards equities if the US economy does not follow Japan's disinflationary / deflationary path of the last 22 years.

Unfortunately, none of the above guarantees that we have commenced a so-called 'healthy consolidation' in stock markets, rather than a repeat, of one of the four white knuckle rides since the January 2009 low. Therefore, I will repeat a suggestion mentioned during other temporarily overbought and overextended stock market conditions. Cut back on positions that you have been concerned about, particularly if they have seen good rallies since mid-November, while prices are still relatively high, rather than when the investment community is bearish following another correction. In other words, buy low, sell high.