The end of the end?

April 20, 2009

While nobody would be rash enough to predict the end of the economic downturn, there are certainly increasingly loud murmurs that the bottom of the stock market fall may have come.

Battered share prices have become so cheap that the pound signs are beginning to light up in the eyes of investors as they pile back in, and it’s smallcaps that are really shining. You only have to look at the numbers, companies like biotech firm Alizyme doubling at the end of last week and engineer White Young Green tripling.

What has happened of course is that as buyers come back to the market, they are finding a shortage of sellers, pushing up prices. Because the hardest hit shares are the ones that will bounce the hardest, it is the higher risk smaller end of the market that is seeing prices increase most steeply.

The FTSE’s Small Cap index has rocketed by a whopping 23 percent in the past month, dwarfing the 6 percent rise booked by the FTSE 100 in the same period. As long as there are no nasty surprises in company earnings this week, then we may well start seeing investor confidence trickle back.

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