Read the passage given below and solve the questions based on it.
For more than three years, Anna Feng did not tell her husband that she had sunk nearly half of their savings into the Shanghai stock market. While he thought all their money was safely sitting in a bank, the value of the stocks plunged by almost 75%. But over the past couple of months, the Shanghai market has shown signs of life, and Feng, a 56-year old retiree, has recouped half her losses. She is quietly hopeful that may be she will make it quietly hopeful that may be she will make it all back. “Everyone seems to be so optimistic about the markets now,” she says.
Around the world, stocks have been on a tear. In Asia, for example, the Tokyo TOPIX stock index hit a 14-year high last week as a bull run in once-dormant Japan gathered momentum; Mumbai’s main equity index hit an all-time high in trading early Friday amid India’s continuing economic boom; and Hong Kong shares reached a five year high while indices in Singapore, Jakarta and Sydney set new records. And though stock in Asia, in particular, are on fire, they are not alone. From Germany to Venezuela to South Africa, equity markets in both mature and emerging markets have moved up sharply this year and show little sign of slowing.
The underpinning of stocks strong performance, global bulls say, is straight forward. Economic growth continues to be strong in places where it has been buoyant for several years (the U.S., China and India) and is finally picking up in places where it had been notably absent-Japan and parts of “old” Europe. Moreover, earning and corporate balance sheets around the world as healthy as they have been in years. In Japan, corporate profits have climbed for four straight years and consumer spending is rising briskly on the back of declining unemployment. Economists say that Japan is now in a golden cycle. So, for now, is much of the world. “it comes down to very simple macroeconomics.” Says Subir Gokam, an economist at CRISIL, India’s largest credit rating firm, “the global economy is growing without much inflationary pressure.”
Is anything wrong with this picture?
One very big thing. Warn the skeptics. Interest rates are rising nearly everywhere, and if there is one simple adage that many investment advisers live by, it’s this “when rates are high, stocks will die.” Indeed, one of the most impressive-or scariest-aspects of the current global bull run is that it has come in the teeth of central-bank tightening. Most importantly by the U.S. Federal Reserve, which could slow growth in the world’s key economic locomotives. The Fed has increased key short-term interest rate the so-called Fed funds rate-15 times dating back to June 2004, and is widely expected to raise it once or twice more over the next few months. A brief recession and the Sept. 11 terrorist attacks in 2001 spurred a prolonged period of very low interest rates. That boosted U.S. consumption-in particular the rate-sensitive housing market-and kept the global economy humming. But long-term rates are now beginning to tick upward: last week the U.S 30-year treasury bond reached 5.04% – it’s highest level since late 2004, and the housing market is cooling off-potentially triggering an economic slow-down as homeowners cut their spending.
According to the passage, what makes people hopeful about the markets?