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? 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 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.