The FTSE 100 Index (“footsie”) and Dow Jones Industrial Index (“dow”) are meant to be barometers of the health of the UK and US economy respectively. Given the interdependence of both economies, it is hardly surprising that both indices move relatively in sync.

Both indices reached their peaks (post 2003) in 2007 before the onset of the financial crisis. The Dow closed on Friday, 1st March 2013 at 14,089.66, up 0.64 percent for the week and within striking distance of the all-time peak of 14,164.53. The gain came despite US$85 billion in federal budget cuts known as the sequester that kicked in on Friday, 1st March 2013.

I am not a financial guru but if the Footise and Dow are meant to provide an indication of the health of the economy, then why is unemployment rate stubbornly high and high street store closures increasing by the day? I definitely don’t feel that the outlook today is any better than that of 2007.

I reckon the ample supply of cheap credit by Central Banks has lots to do with this rally. If the indices are dislodged from fundamentals then an equity bubble is created. But as John Keyes famously said “The market can stay irrational longer than you can stay solvent.”.