An insider's guide to the market: This March share prices throughout the world were plumbing new depths as investors fretted over geopolitical tensions and the risks posed by deflationary forces. In the six months since then, worries about deflation seem to have evaporated.

There is now a growing body of economic and financial data that supports the case for a synchronised global expansion taking hold in early 2004.

The economic cycle is alive and kicking and it now seems that many of the world's industrialised nations are in the early stages of a cyclical economic upswing.

The financial markets have moved quickly in anticipation of such an upswing, with equity prices rising in contrast to falling prices for fixed interest government bonds.

Investor sentiment has shifted quickly and dramatically in favour of equities and there now seems to be substantial upward momentum across most equity markets.

Selling of equities by institutions and hedge funds has dried up, and private investors are coming back into the market. Evidence for this in the US market comes from mutual fund sales data, which show that inflows into equity-based funds are now growing rapidly.

The bear market's vicious cycle of falling share prices leading to increased selling has been replaced by a virtuous cycle of rising share prices attracting more and more buyers.

"The trend is your friend" is an old Wall Street saying and the current trend is now acting to sustain the current phase of rising share prices.

The phrase was often bandied about during the latter phase of the late-1990s bull market. A defining feature of most equity bull markets is the tendency of investors to invest increasingly on the basis of momentum. Momentum investing leads to more and more money chasing after those stocks whose share prices are already in a strong uptrend.

A defining feature of the late 1990s bull market was the heavy concentration of investor focus on the telecoms, media and technology (TMT) stocks.

A whole new jargon developed involving phrases such as "irrational exuberance" and "old economy" versus "new economy" stocks. The share prices of "old economy" stocks seemed destined to languish while the sky was the limit for "new economy" companies.

The bubble burst in early 2000, marking the beginning of a three-year equity bear market. Over this period investment reports written by stockbroking analysts have quietly dropped the bull market jargon and replaced it with a return to assessing shares on the basis of the fundamental value of the underlying businesses.

Lessons have clearly been learnt among the investment community over recent turbulent years.

However, an analysis of the sectoral pattern of performance in the US stock market raises some awkward questions concerning the sustainability of current market levels.

In particular, technology stocks have once again led the broader market as evidenced by the 40 per cent year-to-date rise in the Nasdaq Composite index compared with the 16 per cent rise in the S&P 500 index. Technology stocks are now trading on a price-earnings ratio (PER) that is over twice the PER of the US market average.

This can only be justified if technology earnings grow at a faster than average pace over the long-term.

Of course, technology stocks have fallen a long way from their peak bull market levels and despite the recent strong rally are still well below all-time highs. The Nasdaq is now just over 60 per cent below its all-time high compared with the S&P 500 that is (only) 33 per cent below its high.

However, it should be borne in mind that the broader economic context during the late 1990s was one that was very favourable for technology companies. Capital spending was growing rapidly and the share taken by IT was also growing.

Most corporations are now adopting a much more sober stance towards IT spending and a return to the heyday conditions for the IT industry in the run-up to the Millennium seems extremely unlikely.

Therefore, it is difficult to justify a much higher valuation level for the technology sector as a whole than that which applies to the overall market.

Despite the caveats, technology stocks throughout the world have joined in this rally and the accompanying table shows how several Irish technology companies have performed over the past three months.

Anyone who bravely invested in these firms earlier this year has already been rewarded. But most shareholders in these stocks will have invested at a much earlier stage and most will still be nursing big losses.

While current positive momentum can support the tech sector, further gains will be dependent on evidence that business conditions on the ground are actually improving.