Are there still bears in the woods?
Whatever happened to the bear market? A matter of weeks ago we were in the depths of the credit crisis with bank shares and general market uncertainty driving down UK share prices, those clients brave enough to look at their portfolios were asking the obvious question, "We've bailed out of property funds, should we be doing the same with our equity holdings?"

I'll be the first to admit that I was nervous, I remember 2000, but just as I was beginning to question my own advice to hold on and hope for calmer waters it just could be that the skies are clearing with share prices rising at last.

This may be just a minor rally in a prevailing bear market, nevertheless shares have continued to push up from 5,414 in mid-March to 6,200 in the middle of this week - so what is the explanation and what lessons can we draw from this?

There is consensus in many quarters that there is increasing confidence that the credit crunch problem has begun to be contained, significantly there have been two main drivers to the market falls of the first quarter of 2008; firstly the ‘credit crunch’ coupled with soaring commodity prices.

The first now looks containable, the key development this week was the announcement that the American fund house, BlackRock, was paying £7.6bn for sub-prime loans owned by UBS, the Swiss bank.

This follows similar purchases of sub-prime debt by other hedge funds proving that there is a market in this kind of debt, it has responded to the credit crisis and begun to find a way through.

It started because nobody had faith in the sub-prime loans made to fund house purchases in the US which were becoming increasing unmanageable for the US homeowners in a climate of rising interest rates and falling house prices.

The banks had granted huge numbers of these loans, so banks stopped lending; even to each other. They were not keen to take on even more mortgages onto their books. They had losses and capital ratios to worry about, and so were in no position to lend on to those wanting mortgages so obtaining one became more difficult and expensive.

Now, finally, banks are raising money by rights issues, share sales and selling off sub-prime mortgages to hedge funds – the lending freeze is beginning to thaw and the first tentative signs of an increase in appetite for mortgage lending both in the US and here in the UK is emerging.

Good news for the consumer, the housing market and businesses, as companies too will be able to borrow once again allowing the economy to move forward.

The stock market is still left with the worry about rising commodity prices but one of the two causes of this bear market has lost some of its force, that is why I think the rally is rational and should continue.

The UK economy may still be dogged by the spectre of inflation, economic slow down and a general pessimism amongst the public for their personal financial wellbeing, nevertheless, this invariably does not affect share prices.

Share price falls are invariably the precursors of the tangible economic pain we are feeling now and not the other way around.

If your resources allow, this is the time to emerge from the apparent safety of cash, where the only certainty is that rising inflation will erode your capital, and buy back into the market where presently equities offer better value than they have for some considerable time and should preserve the true value of your savings.