With interbank lending showing “signs of life,” there are signs that stock markets have reached their bottom and the rest of the year will unfold without another meltdown, CIBC World Markets says in a new report.

“With credit and liquidity fears abating somewhat, concern is rapidly shifting to one of the other key factors clouding prospects for a heavily resource-weighted TSX, the troubled global economy,” chief economist Jeff Rubin commented.

Mr. Rubin also cited China's massive stimulus package, which he said could boost the country's economic growth by up to 3 per cent over the next two years. He also pointed out the United States is poised to bring in another stimulus plan.

“We are cautiously optimistic that we can ride out the balance of the year without any further systemic shocks,” Mr. Rubin said.

Still, he said, the “building blocks” for a sustained rally in stocks are not firmly in place, even though it “seems safe to assume that a grim economic outlook is already well priced into valuations.

“Our 12,000 target for the TSX composite next year would represent only a typically paced recovery, benchmarked to past cyclical yardsticks,” he said. “It is certainly consistent with the three-year period it has taken to fully reverse comparable percentage declines, although the rapidity of today's crash may suggest, given the speed of market reactions, a more rapid recovery when the news brightens.”