The FTSE 100, the premier benchmark of the London stockmarket's health, broke through the 4,000 barrier last week, prompting some equity strategists to declare the three-year bear market at an end.
But anyone expecting savers to come flocking back to shares should think again. A rise of more than 20 per cent in the index may herald the start of the end for the long grinding slump in share prices.
Nonetheless, it is worth recalling just how far the market has fallen from its peak on New Year's Eve 1999. On that day, the Footsie almost hit 7,000. The upshot of 36 or so months of falling share prices is that the flood of new investors who bought into the market in the spring of 2000 are still nursing 40 per cent losses.
The poor unfortunates who sank their savings into dotcom stocks or technology funds have seen their money shrink by at least four-fifths. There can be no doubt that the hype of the high-tech boom sucked in savers who should have never touched equities.
Whether through greed or through fear of being left behind, their experience of the stockmarket has been nothing short of disastrous.
Investment professionals mutter darkly about a lost generation of investors, a group of people so appalled at their treatment by the market that they will never return.
Sadly, the fallout from the three-year depression will not affect just this group. Many other sets of savers have had their fingers burnt, sometimes badly. The market malaise has spread throughout the savings industry, leaving seemingly safe plans riddled with holes.
One of the biggest casualties has been with-profits business. Many of its customers, it now emerges, had little idea that their contributions to a personal pension, mortgage endowment or insurance bond were being gambled on the stockmarket.
Certainly, few had any clue that up to 80 per cent of their money had been punted on shares. More recently, the sometimes colossal losses suffered by buyers of precipice bonds have created another pocket of savers who are totally disenchanted with stocks and shares. The quarter of a million people who put their cash into stockmarket-linked bonds have hurtled back to the building society faster than you can say Ron Sandler.
They have returned despite the paltry rates of interest on offer by most mutuals and banks. Financial advisers will have a tough time persuading any of these people to come back to the stockmarket any time soon. As one well known IFA mentioned to me recently, clients could have tolerated two years of falling share prices but not three.
You stand a better chance of convincing Dale Winton that a sun tan does not suit him than you do in enticing any of these people into equities again.
Even when a saver shows a flicker of interest in shares, the numbers do not look that attractive. The consensus view for the annual return on equities is 7-8 per cent. Deduct a couple of points for costs and charges and you can realistically expect a return of about 6 per cent averaged out over say five or 10 years.
Compared with the real rate of return from cash, this is pretty good but do not count on savers to see it this way. Our expectations of shares have been corrupted by the bull run of the 1990s.
In that halcyon era, a 10 per cent return was considered to be guaranteed and you could easily double your money within a year or two. Today, a 4 per cent return from an internet savings deposit with no risk to your capital looks pretty good compared with a 6 per cent profit on an equity fund.
For those who do like the idea of sticking with the stockmarket, it is unclear just how this consensus return will be achieved. The London market is still subject to a number of technical barriers. The 4,000 level was not just significant for psychological reasons. It is also the level at which many pension funds are believed to be willing to crystallise their losses on shares and shift more of their portfolio to fixed-income securities.
Such a move enables pension funds to match their assets to their liabilities more closely, particularly if the scheme is closed to new entrants. They reduce their running costs to boot. Life funds, including with-profits funds, are also cutting their weighting in shares. AMP shocked investors earlier this month when it admitted privately that its subsidiary Pearl was prepared to reduce its holding in shares to virtually zero. So who is going to be the buyers of shares?
Pessimists predict that the market could trade sideways for years to come. They point out that the Dow Jones Industrial Average index, the flagship benchmark for American shares, added just a single cumulative point in a decade and a half.
In London, too, there have been long periods when the market drifted sideways, forcing investors to trade regularly to make even a meagre profits from equities. No wonder there has been such a lot of talk about the death of equities over the past few months. Shares may have some life left in them but it could be a while before it shows itself. Do not expect private investors to be first in line to offer the kiss of life.
Richard Miles is deputy personal finance editor at The Times