Companies that once looked as if they could fail have been able to manage their cashflow and reach agreements with bankers. But shares were undoubtedly oversold in March with many prices extremely depressed.Investors’ worst fears at that time have failed to materialise. Indeed, it is often simply the removal of fear that is the greatest positive influence on share prices. A stock market laid low by pessimism can rebound just by bad news slowing. Company and economic news is not signalling a strongly recovering global economy, or a good reason to pay so much now for shares. The improvement in demand is typically subject to fierce price competition.

Profit growth has mainly come from cost-cutting, in particular, shedding labour. In fact, in many areas the post-Iraq economic bounce has been subdued. Can the real value of businesses really change that much, so quickly?Little has changed in reported business trading. But the shares of the 250 medium-sized companies immediately under the FTSE have, on average, performed twice as well Smaller companies have gained more than 60 per cent.

The few stories that do surface can get disproportionate attention in the news vacuum. Investors need to remember that share prices at this time of year can lose touch with reality; risks are increasing just as the stock market rise seems so reassuring.Since the stock market rally began on 10 March, the FTSE 100 index has gained more than 20 per cent. Even a small interest in buying can easily trigger a sharp price jump. Those who sold their shares in June for peace of mind while they were away could find they have had an expensive holiday.
In fact, with fewer dealings, a lack of new research and few companies reporting, it can take little to move share prices in the summer. Many shares are moving to 12-month highs, and investors still at their desks are making good profits. August has a reputation as a dull month for stockmarkets.

Holidays and a lack of newsflow conspire to cut activity and investors often simply postpone decisions until September This year, things are different. With restructuring costs behind it and profits tipped to rise 50 per cent to £1.6m, Shiloh at 213.5p is looking for attractive acquisitions.Robert Tyerman is news editor of ‘Growth Company Investor’Sean O’Grady is away. This is cheering for healthcare specialist Shiloh, which has a strong market presence in incontinence protection, medical equipment decontamination, mobility aids and related items.The company has a good chance of winning a big slice of the £250m market in decontaminating used hospital surgical instruments being opened for bids by the National Health Service. There is an array of annual costs and Hampden takes a 12.5 per cent profit commission.As with Pafs, looking after an ageing population will remain a priority.