By Louise Cooper BBC World Service business reporter

Investors are returning to US stocks

What happens on Wall Street affects the world as a whole.

And in recent months, the US markets have been roaring.

Since the lows in mid March, the Standard and Poor's index of the top five hundred firms has risen almost 30%.

Meanwhile the Nasdaq index of leading hi-tech shares has gained a huge 50% after three years of big stock market falls.

It seems investors are back buying America again.

"We look back in history and we think that the best period of history really are the 1960s, and if you look at the evaluations relative to the profits companies were making at that time it is pretty similar to where we are today," said Nigel Richardson of Axa Investment Management.

"That normal level of evaluation is based on the judgement that the inflation background we've got today, the interest rate background we've got today and the growth background we've got today are very similar to where they were in the 1960s."

Time to buy?

Consequently, Mr Richardson thinks American shares offer good value.

Defence spending has fuelled growth this year.

In other words, he is a bull, or someone who is sure US shares are on the up.

"In addition to evaluation, the most important question in town is: 'Is there going to be any US growth'," Mr Richardson said.

"Is interest rate policy in the United States and government policy in the United States working to stimulate US growth?

"The answer is, it has already stimulated growth and we think it is going to continue stimulating growth into next year," he said, predicting that US gross domestic product (GDP) will grow at a 3.5% rate next year "which is a return to normality".

Gloomy outlook

But not everyone is convinced.

While the latest figures show the world's largest economy has been growing at the equivalent of 2.4% a year, two thirds of that growth came from Washington's extra defence spending.

And so far the recovery has been jobless.

In fact, three million jobs have been lost since President George W. Bush took office over two and a half years ago.

If history is any guide, the rally will run its course at some point within the next nine to 18 months David Schwarz, stock market historian

Many industrial firms are facing tough times. Car makers are struggling and airlines are going bankrupt.

And even when companies report progress, investors worry about the quality of the profit growth, saying much is down to cost cutting and benefits of a weaker dollar.

So there is plenty of support for investors who take a cautious, or bearish, view.

"The US has built up a lot of debt, both by the government and consumers, over the last 30 years, and these debts one day have to be repaid" said Michael Hughes, chief investment officer at Barings Asset Management.

"When they are repaid, that affects economic growth and it reduces the returns from being in the US stock market.

"So I am rather conscious that the period of repaying debts may be near at hand, and hence on the basis of that the returns you are likely to get from being in the US stock market are rather low."

Current strength

Yet at the moment most major markets stand higher than they did at the start of the year.

It is a big shift after three years of declines, and according to some a predictable one.

"In the shorter term, history teaches us that after we have a steep drop of 50% or so, like we have had in the last 3 years, there is usually a bounce-back rally," said stock market historian David Schwarz.

"If history is any guide, the rally will run its course at some point within the next nine to 18 months.

"The big price run-up of the 1980s and 1990s will be followed by a massive correction that will take the rest of this decade to run its course.

"We're only part way down that negative slope."

Election rally

President Bush, who is on the re-election campaign trail, urgently needs to create an economic feel-good factor.

So he may help to ensure that 2003 remains a good year for the US stock market.

According to Mr Schwarz, the market has risen in the year leading up to every one of the thirteen post-war presidential elections.

On average that rise was a healthy 19%