It’s curious to see so many asset managers reaffirm their faith in a bullish 2012 for world markets just as a buzzing first quarter comes to a close on Friday with hefty gains in equities and risk assets.  Whether or not there is a mechanical review of portfolios at quarter end, it’s certainly a reasonable time for review. The euro zone crisis has of course eased, the ECB has pumped the banks full of cash and the U.S. recovery continues.  So, no impending disaster then (unless you subscribe to the increasingly-prevalent hard-landing fears in China). But after 11+ percent gains in world equities in just three months on the back of all this information, you have to wonder where the “new news” is going to come from here. The surprise factor looks over and we’re highly unlikely to get 10%+ gains in global stocks every quarter this year.  So, is it time for tired markets to sober up for a while or maybe even reconsider the risk of reversal again? Strategists at JPMorgan Asset Management, at least, reckon the economic news has just lost its oomph.

There are broad signs of exhaustion in markets, which is coinciding with a softening in the data, suggesting that in the short term the moderation in the “risk on” environment may continue.

JPMAM cite the rollover in the Citigroup economic surprises indices, shown below, and also say their own propietary Risk Measurement index — a 39-factor model built on data from money markets, equities, economic data, commodities etc — is flagging more caution.

Time for a pause and bit of a think then, at least until the first-quarter corporate earnings season kicks in next month. And it’s here the next leg of any equities story may have to play out, rather than in the corridors of central banks and finance ministries. Gavyn Davies, Fulcrum Asset Management chairman and formerly BBC chairman and Goldman Sachs economist, reckons the valuation case for equities is pretty strong after a lousy decade — even if government bond yields continue rising. What’s less certain, he says, is whether the historically high share of nominal GDP commanded by after-tax corporate profits can persist. This requires a paradigm shift, one he reckons is bridged by globalisaton trends. One quarter won’t solve that puzzle, but attention may shift in that direction over the coming weeks.