Half way through 2009 and the reporting season is back. Since the last edition we’ve had trading updates from the industry bellwethers Hays and Michael Page. On the face of it trading seems very challenging and it is clear that we have not yet reached the bottom of the recruitment cycle. However, this is not enough to worry the bulls on the stock market and it seems more and more as if we have seen the bottom of the stock market cycle as evidenced by the recruiter share prices losing little of their gains in Q1 and Q2.

It is interesting to compare the stock market cycle and the recruitment cycle. In this column we’ve always said that the stock market will move at least six to 12 months ahead of the real economy. It now looks as if March could well have been the bottom of the stock market and indeed the FTSE Allshare has increased by 25% since then.

Contrast this to the comments from Hays and Michael Page. Alistair Cox, chief executive of Hays, commented that the quarter ending June 2009 had been “another tough quarter with continued reductions in demand across all the 28 countries in which (Hays) operates”. Not many signs of green shoots there. In the UK Hay’s net fee income (NFI) fell by 45% in the period. Steve Ingham, CEO of Michael Page, said that he “anticipates a challenging third quarter as we enter into the seasonally quieter summer period, both in Continental Europe, which was later into the downturn, and in the UK”. For the quarter, Michael Page’s UK NFI fell by 42%.

On the face of it these comments from the UK’s two leading players might suggest that the shares are in for a bad time as the companies face challenging markets on almost all fronts and big declines in NFI of over 40%. However, the share prices have reacted with only modest falls this week, in both cases falling by less than 10%. This is a clear sign that the market is now looking forward six to 12 months, and as comparatives start to become easier and cost-cutting takes effect we could see a resumption of the rally from Q4 onwards.

• Michael Vassallo, equities analyst, Brewin Dolphin Investment Banking