A war in Europe, supply constraints, inflation, rising interest rates and a possible recession have completely preoccupied the markets this year.
So it's no wonder that the S&P/ASX 200 Index (ASX: XJO) sank almost 12% for the first half of 2022.
But oddly, while all those problems still persist, the index has rallied 5.8% this month.
So are ASX shares back in vogue?
One expert certainly thinks so.
Share markets didn't even blink after a monster rate hike
According to DeVere Group chief executive Nigel Green, investor appetite for risk assets — such as shares — has returned.
He made the observation after seeing stocks head upward following the US Federal Reserve's whopping 75-basis-point rate hike on Thursday morning.
"Typically, markets get into a tailspin over interest rate hikes, especially the size of the Fed's latest 75 bps," said Green.
"But investors have seemingly shrugged this off, maybe because it was largely priced-in, maybe because the Fed chair suggested rate rises may now slow."
That reaction from the markets suggests a shift in the bigger picture, he added.
"Investors appear to have rediscovered their appetite for risk, with global stock markets and high yield corporate bonds both making steady gains over the month so far."
The Reserve Bank of Australia on Tuesday is expected to follow the US' lead, and raise its cash rate by a likely 50 basis points.
Green also noted the types of shares that were severely punished in the first half of the year for being riskier have actually outperformed in the July rally.
"Global small-cap stocks have outperformed global large-cap stocks, while in the US, the tech-heavy Nasdaq Composite (NASDAQ: .IXIC) index has outperformed the broader-based S&P 500 Index (SP: .INX)."
Why is everyone so bullish all of a sudden?
So what's going on?
Green identified four drivers as to why investors are bullish again.
"First, investors believe that central banks will squeeze inflation out of the system," he said.
"The higher interest rates go in the near term, the sooner they can come down and help facilitate a new economic cycle."
The second factor was the sell-off in the first half meant that valuations no longer looked expensive, as they did for much of 2021.
"Third, the 'there is no alternative' (TINA) argument persists," said Green.
"Although central banks are raising interest rates aggressively, they remain negative in real terms. Equities have the advantage of being linked to the real economy, with many companies able to raise their selling prices with inflation and so offer investors a level of protection from inflation that cash and bonds can't."
Lastly, the larger companies around the world are generally in a "sound financial position".
"Big tech in the US is cash rich. Global energy and mining companies are enjoying windfall earnings. Rising interest rates help financials' boost profits," said Green.
"Meanwhile, many companies have used the rock-bottom borrowing rates of recent years to refinance their debt at much cheaper rates."
While Green is a believer that sentiment has turned, he warned investors that none of the problems the market feared have actually gone away.
"Economic data continues to weaken. Continental Europe appears particularly vulnerable to recession later this year, given its reliance on Russian gas," he said.
"Investors' response should be to avoid panicking and stick to basic investment truisms."
