The prospects for a more sustainable rally in equities appear good, says Jeffrey Palma, strategist at UBS Investment Bank, who sees reasons for optimism in global stock markets, in spite of increased volatility, stability concerns and expectations of a US recession.

“The policy reaction to financial market turmoil has become increasingly aggressive, particularly from the Federal Reserve,” Mr Palma says. He argues that this should help dissipate the uncertainty that has depressed equity market valuations.