You might not know it, but the S&P/ASX 200 (Index: ^AXJO) (ASX: XJO) had its best week in four years last week, rising 4.5%.
So much for all the doom and gloom, and claims about the end of Australia and the world. According to Credit Suisse analyst Damien Boey, the market is up almost 7% in 7 days.
Speaking to Fairfax Media, he said, "The thinking is the Federal Reserve is not going to raise rates at all in 2015. That sends the US dollar down, it takes a lot of the capital outflow stress off the emerging markets, and this allows countries like China to stimulate. Hence, commodity stocks have actually led the gain."
"That seems to be the thinking. Whether or not that's right is another matter, but that's what investors are saying."
Several market commentators have also begun to predict that commodities prices may be at the bottom. On Friday, the iron ore price climbed past the US$55 per tonne mark, Brent Crude oil is at US$52.65 per barrel while gold is at US$1,155.90 per ounce.
On the back of those price moves and fears over China's growth diminishing, the Australian dollar has rocketed past US73 cents and appears headed higher.
The big driver, of course, is whether or not the US Federal Reserve will raise interest rates this year or next. Commentary suggests US Fed members are keen to start raising rates, but may be forced to wait until next year, as global growth struggles to see much improvement.
That should keep the US dollar down and other currencies such as the Aussie rise, while also providing a boost to our stockmarket.
The good news for investors is that after the heavy selling in August and September, many quality blue chips are still on sale. As I wrote earlier this month, the big four banks Australia and New Zealand Banking Group (ASX: ANZ), Commonwealth Bank of Australia (ASX: CBA), National Australia Bank Ltd (ASX: NAB) and Westpac Banking Corp (ASX: WBC) look cheap – although their outlook may be a bit clouded.
Back in September, I also highlighted 5 solid blue chip stocks that had also been sold off. Their share prices have recovered somewhat since then, but could still be great investments at today's prices.
Foolish takeaway
History has repeatedly shown that purchasing stocks during market downturns is the best time to buy. In the short-term the market could still fall further, but over the long-term, the stock market is likely to continue generating returns of around 10% a year on average.
