When European equity markets paused recently after rallying by 20 per cent, it prompted some to say that the ‘bear market rally’ had come to an end. But while a 10 per cent correction is possible, liquidity, momentum and valuations could support a continued rally of 20-30 per cent or even more – despite concerns around earnings, says Ian Harnett of Absolute Strategy Research.

“The ASR “spook indicator” suggests that risk appetite across a broader range of asset classes has recovered, while our proprietary “Financial Stability Indicator” also shows stresses easing in response to sharply lower rates and spreads and increased global liquidity.