Jeremy Warner's Outlook: UK stock market stages a remarkable rally so are the bulls back in charge? Hardly

Metal and oil prices have risen too far, too fast. At the first sign of distress in Asian markets, there will be a correction

Sell in May and go away...? The UK stock market has experienced a sharp rebound since the two-year low it hit in late March, taking it back to around the same level of a year ago before the credit crunch hit.

Is this a credible rally, or is it only a matter of time before the law of gravity takes hold once more? The credit crisis may be abating, but it is still very much with us. What's more, its effects on the wider economy are only just being felt, with credit across the board now less available and more expensive.

This is affecting not just the mortgage market but business lending too, and it already means less money for growth, consumer credit and investment going forward. The economy is, as a consequence, slowing fast, yet the stock market is behaving as if the crisis both in financial markets and the economy is now largely behind us.

Except that the stock market is not really behaving in that way at all. Look beneath the headline numbers on the indices, and it's only oil and mining stocks, sustained by the continued boom in commodity prices, which are holding the London market aloft.

In many other sectors, notably banking and housebuilding, there has already been a prolonged bear market. Some banking stocks again hit new lows yesterday. Returning to the old adage of "sell in May", the question this time around is not about whether you sell the market as a whole. If you are still in banks, retailers and leisure, it's already too late for that.

Rather, it's whether you sell miners and oils and dip a toe back into financials. This is the next big investment rotation waiting to happen, but, whereas it may be right to sell miners, it's a brave investor who sticks the money back into banks.

Financials are unlikely to rebound until the severity of the economic downturn becomes easier to judge. At this stage, it is still anyone's guess as to whether we'll escape a recession or, if we get one, how deep and prolonged it might be.

Whatever the answer, more or less everyone predicts a difficult couple of years, with disposable incomes under pressure, the public finances in disarray, and business investment struggling to take up the slack. Germany's surprisingly good GDP figures for the first quarter give some cause for optimism, but are more likely to be an aberration than to mark the start of a new trend in European growth.

Against that, the US economy should be in recovery mode by the end of the year, as the powerfully reflationary cocktail of tax rebates, lower interest rates and the weak dollar take hold. But it may well be that on this side of the Atlantic, we'll be entering the tank just as America pulls itself out.

Returning to equity markets, some brokers talk of the elastic band effect, with the difference between mining and oils on the one hand, and financials on the other, now so stretched that one or other of them is bound to come hurtling back towards the other at some stage. But which way round will it be? Or maybe the elastic will break altogether.

According to a circular from Citi yesterday, we are still only half way through a secular upswing in commodities, with growth in consumption remaining well above trend for the next four to five years. Others think we are witnessing a bubble which is about to burst. Regrettably for those looking for a clear-cut view on the stock market, both these observations may be true.

Metal, oil and other commodity prices have risen too far, too fast, bolstered by big inflows of investment and speculative money. At the first sign of distress in Asian markets, there will be a correction. On the other hand, the long-term trends in supply and demand look safe enough. So even if you are inclined to sell, you should probably be getting ready to buy again on St Leger's Day.