The question is, what exactly should that be?
My initial, and rather naïve thought was that it might not even involve central banks at all. I thought, perhaps, we might be able to look once more at fundamental valuations, at a company’s cash flow and property’s proximity to amenities.
But, sadly, that halcyon vision vanished rather quickly.
For, as my colleague Alex Sebastian argued earlier today, the likely next focal point for markets is going to be the next step by the Fed. And, like someone that has been sitting awkwardly on the edge of zero for seven years and whose legs have gone numb, those steps are liable to be clumsy and hold the possibility always that they might stumble, or worse, fall over.
"Like someone that has been sitting awkwardly on the edge of zero for seven years and whose legs have gone numb, those steps are liable to be clumsy."
Another way to look at it is that the conversation never actually moved away from fundamentals.
As Russell Silberston, head of rates at Investec Asset Management told Portfolio Adviser when asked the question posed in the headline: “We never stopped talking about fundamentals. The reason we have had so many years of emergency rates was because there were very good reasons for them – the world was in the midst of the worst recession since the early 1920s.”
That said, he added: “Of course, if this move represents the beginning of a return to some sort of normality, then we are liable to begin once more to be able to look at things on a more micro level. But, that transition from a world driven by macro risk-on/risk-off trades to one where more attention can be paid to idiosyncratic micro moves is likely to take a long time as the Fed is not the only player in town.”
Thus, while the conversation will change to one of flight path, rather than ignition, the central banks of the world remain firmly in the pilot’s seat. But, as with any good pilot, the focus in this part will be trying to ensure as smooth a ride as possible.