Stock markets When the money flood recedes

European equities keep on doing well; they are up 22% so far this year. But this is the product of easy money. The combination of a global flood of liquidity and low real interest rates has made equities look misleadingly appealing. Companies have profited from loose financial conditions. Lower rates and narrow credit spreads have reduced financial pressure, while easy credit has kept customers from squeezing on prices. The result is an expected return on equity of 16% in 2005, well above the l...