I also highlighted that a surprise tightening of policy by the European Central Bank (ECB) could be a problem. Cue some comments from ECB President Mario Draghi that were interpreted as hawkish. These sent bond markets into a brief tailspin, with equities following them lower. Despite markets remaining near all-time highs, everyone seems to be living on their nerves at the moment. As one of my colleagues expressed it last week: “I am trying to enjoy the party, but I’ve definitely got one eye on the fastest route to the door”.

So what exactly introduced the fly to the ointment? It all seems to have started at an ECB forum in Portugal, where Mr Draghi made comments to the effect that ECB policy is working, Europe’s economy is recovering and the threat of deflation is lifting. This was seen by traders as a reason to begin withdrawing extreme monetary stimulus in the form of negative deposit rates and Quantitative Easing (the ECB is currently buying €60 billion of government and corporate bonds every month). The yield on the German 10-year Bund shot up from 0.24% to 0.46%, and the euro gained a cent against the dollar. European equity indices fell 2.5%, and the ripples spread out across global markets. Headline writers had a field day questioning the survival of the bull market.

We have maintained the view that the last thing central bankers want to do is shock markets with unexpected policy changes. Therefore it was not entirely surprising that within twenty-four hours the ECB’s press office was leaking comments that markets had not considered the caveats in the details of Draghi’s speech and that there was no current intention to tighten policy; he was just laying the ground for future discussions about the possibility of tightening policy.

As is often the case, there is no smoke without fire. There is no doubt that Europe’s economy has improved. Indeed it has been the key component of upgrades to global growth forecasts this year. The downward pressure on inflation from lower energy prices has been alleviated, and unemployment across the Eurozone continues to fall, even if there are still large disparities between countries in terms of the current level. Even so, Investec Bank’s official forecast for European growth is still only 2.1% this year (and 2% in 2018), so hardly hitting the ball out of the park. We continue to believe that the ECB will play it safe, with a bias towards maintaining growth.

The situation is exacerbated by the fact that there are mixed policy messages coming out of the Bank of England – the last two weeks have something of a hokey-cokey developing in terms of Monetary Policy Committee members contradicting each other – and the Federal Reserve continues to plot a path for interest rates that is steeper than predicted by the futures market. It’s fairly clear that major central bankers (with the possible exception of Japan’s) are minded to return to more normal monetary policy settings, if only to accumulate some ammunition to deploy during the next downturn, but it’s far from clear what “normal” means today. Certainly lower than in previous cycles, we believe, which will bring little solace to those seeking safe income.