WALL Street was rattled on Monday night. It was as though, amid the sharemarket’s supreme short-termism, someone said, ”Heh, it’s the two-year anniversary of the bull market this week!”

Traders were spooked. Two years. Can this bull market last? Suddenly business news websites were cranking with talk of a bubble. Another bubble. Just like toppling Arab dictators, the cycles turn quickly these days.

Everything has sped up, from the news cycle to the economic cycle.

And let’s face it, interest rates in the US, still close to zero, are yet to budge since the global economy almost ground to a halt in 2008. A bubble is on the cards, if not already upon us. Never has there been a more accommodating period for monetary policy. Rates have never been this low for this long. Couple this with unprecedented ”quantitative easing” and the ranks of the bears remain justifiably swollen … even as the US and Europe finally begin to grow again.

Indeed, Ben Bernanke, chairman of the Federal Reserve, fronted a Senate banking committee last week. He was asked if the Fed’s ultra-loose monetary policy was creating another bubble. There was ”little evidence”, said Bernanke, that a bubble was developing, although ”nobody could know for sure”. While US sharemarkets have now risen 95 per cent from their nadir in March 2009, Australia has gone nowhere for 16 months. The easy money was made in the 50 per cent jump from March to October 2009.

Shares have rallied more than 20 per cent, so technically we are in a bull market though many contend this is just part of a larger, secular bear market. Yes, the miners have rallied – fired up by China. And the banks have surged – underpinned by the state.

But Australia’s big industrial companies have mostly been mired in a slough.

China too, whose performance we tend to cling to these days, has similarly underperformed the US as it too has tightened interest rates in recent months and just as the US and Europe are getting back on their feet again.

As for the outlook, much hinges on interest rates. Equities tend to rise when interest rates fall, and vice versa. For now, the jury is entirely out as to the Reserve Bank’s next move. Should China keep tightening, it will be a struggle. For the bears then, there is much to fear: possible rampant inflation in the US and Europe, raging oil prices killing off a recovery, and subsiding demand from China.

And for the bulls, there is always the flipside. Equity valuations are not too

onerous at the moment, in light of the

outlook for economic growth. As for inflation, deflation is worse. Besides, inflation fires up growth and lowers the value of debt. The US and Europe have a lot of debt.