Just a few numbers, courtesy of the Telegraph's Ambrose-Evans Pritchard:
Barnaby Martin, [Bank of America]'s European credit chief, said world asset markets may face a stress test as the US Federal Reserve starts to tighten afters year of largesse. “Our biggest worry is the end of the liquidity cycle. The Fed is done and it is preparing to raise rates. The reach for yield that we have seen since 2009 is going into reverse”, he said.
Mr Martin flagged warnings by William Dudley, the head of the New York Fed, that the US authorities had tightened too gently in 2004 and might do better to adopt the strategy of 1994 when they raised rates fast and hard, sending tremors through global bond markets.
Bank of America said quantitative easing in Europe and Japan will cover just 35pc of the global stimulus lost as the Fed pulls back, creating a treacherous hiatus for markets. It warned that the full effect of Fed tapering had yet to be felt. From now on the markets cannot expected to be rescued every time there is a squall. “The threshold for the Fed to return to QE will be high. This is why we believe we are entering a phase in which bad news will be bad news and volatility will likely rise,” it said.
What is clear is that the world has become addicted to central bank stimulus. Bank of America said 56pc of global GDP is currently supported by zero interest rates, and so are 83pc of the free-floating equities on global bourses. Half of all government bonds in the world yield less that 1pc. Roughly 1.4bn people are experiencing negative rates in one form or another.
These are astonishing figures, evidence of a 1930s-style depression, albeit one that is still contained. Nobody knows what will happen as the Fed tries break out of the stimulus trap, including Fed officials themselves.
Or, as we showed it recently and far more simply, this:
And in other news, everyone is now bullish because for some inexplicable reason the "experts" continue to mistake the world's biggest equity bubble with the underlying economy.