Markets are back in the waiting room, flipping through outdated magazines and listening for the call from Dr Bernanke, when he brings them in for what many expect will be another rate cut at the end of this month.

Volatility is declining and spreads have fallen as investors conclude that the liquidity crisis has passed. With alarm over the US abating, increased focus on unrest over food prices in developing nations has accompanied a shift out of riskier emerging markets and into commodities and the dollars that buy them.

Indeed, there is a growing body of opinion that holds that US stocks may be one of the best bargains around, what with yet another rate cut looming and the US economy now expected to be pulling through this summer.

Contributing to the confidence have been non-financial corporate earnings, which have seemed out of sync with the trouble among financial institutions. Even as surveys show spreading gloom among the general American corporate community, multinationals such as IBM and Caterpillar are posting reasonably strong results thanks to the fact that they have been able to offset lower US demand with sales in the rest of the world.

What we could be seeing is a twin lag effect: rising confidence in US prospects is likely to feed through this week to recovering demand for emerging market stocks, including those in the Gulf region. Further down the road, however, economists warn that the fallout from the US economic slowdown has yet to fully reverberate, and dwindling credit and US demand is likely to hit the UK and Europe at about the same time the US economy begins to recover.

And while many investors are breathing easier now that a greater extent of the cost of the subprime crisis has been quantified, the potential for further surprises among smaller banks or in different classes of credit derivatives still exists. In the meantime, markets are using the relative calm to keep unwinding positions and lowering debt.