Rising corporate profits and growing concerns about deflation indicate the worst of the market sell-off is over, Craigs Investment Partners broker Peter McIntyre says.
Before the start of September, markets had experienced an exceptionally strong run.
The United States market rose 64% in the preceding three years and New Zealand was not far behind with a 57% return, he said.
Volatility had fallen to very low levels and investment complacency was high - two concerning signs.
After the recent sell-off, investors would have received a sharp reminder markets went through rough periods and that risks remained.
''We could see further weakness over the coming days and weeks, although we believe we are at least halfway through the correction.
"More significant declines in equity markets go hand in hand with falling profits, which are in turn associated with monetary tightening cycles.
''At the moment, profits are growing in most regions and central banks are too worried about deflation to consider embarking on an aggressive tightening cycle.''
Volatility was still expected but not to the degree seen in recent weeks, Mr McIntyre said.
Rather than being viewed as a sign of obvious trouble, investors must acknowledge it was a return to normal, following a period of abnormally low volatility.
Another key point was the silver lining associated with falling oil prices, he said.
Oil prices had fallen nearly 25% over the past three months.
While that indicated weaker global demand and subdued growth, it also meant a key input cost for many companies had fallen sharply.
The energy sector had been one of the hardest hit during the recent sell-off and oil-producing countries would suffer economically as a result of falling prices.
However, the sharp falls would act as an instant boost to consumers and their spending power, as well as companies involved in transport, shipping or travel, Mr McIntyre said.
There appeared to be little inflation anywhere in the world and the impact of lower oil prices would add to the trend.
New Zealand's inflation was only 1% at the end of September, surprising the market, he said.
There was a good case for the reserve banks in both Australia and New Zealand to lower their interest rates, given the low inflation outlook.
The New Zealand central bank was expected to maintain its official cash rate at 3.5% when it met tomorrow, he said.
ASB economist Christina Leung said there were many moving parts to the economy at present. Dairy incomes would be lower than the Reserve Bank had previously forecast, although the likely depreciation of the New Zealand dollar next year would provide a broader cushion for the economy and make for continued growth.
''We are a little more wary of global developments. Europe's slip backwards will remain a risk to global financial stability and a drag on global growth and inflation.
''China's property market is something to watch, while from an inflation perspective China continues to add to global productive capacity.''
The US economy was doing well, but the Federal Reserve appeared a little more concerned about global growth elsewhere and, ironically, the potential economic impact of a strengthening US currency - factors that could delay its own interest rate increases, she said.
Like the Reserve Bank outlook, ''later and less'' appeared to be the story for Fed funds rate hikes.
With global oil prices falling, the fourth-quarter consumer price index - the official measure of inflation - could also show annual inflation very close to 1% when released in late January.
ASB economists were finding it increasingly hard to believe the Reserve Bank would lift the OCR in March with that inflation background, unless it was convinced inflation would pick up sharply.
''We actually do expect inflation to exceed the 2% target midpoint by the end of 2015. But that pick-up is heavily contingent on the kiwi falling by a material amount next year, and by more than the Reserve Bank is currently forecasting.
"In the current environment we don't expect the Reserve Bank would respond to a material dollar fall until it is clearly under way and likely to continue,'' Ms Leung said.
* Most economists do not expect the Reserve Bank to lift the OCR until September next year at the earliest. Already, retail banks have started dropping their fixed mortgage lending rates.
