There is growing evidence that investors are dipping their toes back into riskier assets, believing that last month's interest rate cuts by the US Federal Reserve have at least halted what had been a freefall on equity markets.
Although financial market volatility has not gone away and many stock markets are still suffering, some of the frenzy seen at the end of last year and in January has eased. The S&P 500 index of US stocks, for example, traded in a mostly downward 198 point range between highs and lows in January. So far in February, the range is a more sideways 79 points.
Data from a number of sources suggests that one reason for the slightly calmer atmosphere is a tentative boost in confidence among large investors. Fund tracker EPFR Global, for example, says that the global equity funds they follow - essentially investors in mixed portfolios of international stocks - enjoyed $1.33 billion in net inflows in the week to February 6. It was the first gain for four weeks and was roughly typical of net inflows seen in 2007.
At the same time, State Street found in its latest survey of the $15.3 trillion it keeps as a custodian that money has moved out of what it designates as the most risk averse category of investing for the first time in four months.
Both these reports sit well with data from the US Commodity Futures Trading Commission that shows hedge funds have stopped betting overwhelmingly on falls in US stocks and on rising demand for safe-haven bonds.
They are also heavily betting on volatility to ease from here on. None of this is to suggest that the threats that have battered markets since mid-2007 have gone away. Concerns over the deteriorating US economy and the fear of it spreading its ills elswehere remain.
But there is a belief in at least some quarters that moves by the Fed in January - an emergency 75 basis point cut on January 22 followed by another easing of 50 basis points eight days later - drew a line under stock market falls.
MSCI's main world stock index, a benchmark for many large investors, has lost around 10 percent this year and its emerging market counterpart is down more than 11 percent.
Since January 22, however, they are up around 3.5 percent and 6 percent, respectively. "There is a good chance that we put in a bottom with global equities on January 22," said Jeff Applegate, chief investment officer of Citi Global Wealth Management.
"This is going to be the sixth year in a row that stocks are going to outperform bonds." EPFR Global's funds flows, in the meantime, also suggest a reluctance among investors to let stocks fall too far. "What we have seen over the past 10 weeks is that although people have been bailing out, when an area gets oversold they do tend to come back quickly," said Cameron Brandt, EPFR's senior global markets analyst.
LONG HAUL: The idea that a bottom has been hit and that markets are now heading back to where they were before the subprime crisis hit is fraught with difficulties, however.
For one thing, equities have fallen so sharply that many have a long way to go to get back to where they were. The pan-European FTSEurofirst 300, for example, needs to gain more than 12 percent just to break even in 2008.
There is also an argument, as expressed this week by Morgan Stanley, that investors are complacent about the spillovers from a US-led slowdown into other markets and economies. "Financial shocks that began with rising US mortgage defaults are now spilling over into a global credit squeeze, deleveraging of balance sheets, and tighter financial conditions in many markets," it said in a note.
Merrill Lynch also said on Wednesday that fund managers in its monthly survey were more risk averse than at any time in the past seven years - which might, of course, be one of those extreme positions that signals a reversal is coming.
But the Fed's rate cutting - along with expectations of more, plus easing from the Bank of England and even the possibility of cuts from the hawkish European Central Bank - do seems to have provided a floor for investors.
The biggest danger in all this, in fact, may turn out to be that the Fed had to come up with emergency help in the first place. Michael Metcalfe, head of global macro strategy at State Street Global Markets, likens it to a one-off safety feature in a car crash. "The air bags have been triggered," he said, "but they won't be there if there is something nasty around the corner."