Despite the robust US economy, the market’s prime concern remains when and how quickly the Fed will ease interest rates. What if they don’t? We’re heading into a new normalised post GFC interest rate environment, and long-term higher rates will be a good thing!

It’s a big week for Central Banks: the BOJ on Tuesday, The Fed on Wednesday and the BoE on Thursday… but none of them are set to ease rates (the BoJ might even hike). It’s a very different market to what traders expected earlier this year. This is becoming the Year of Normalisation.

The nations of the West face crisis: how to fund vital infrastructure and critical defence spending without upsetting bond markets? They are worrying about the wrong things. Time to rethink government spending and how to do it.

Christine Lagarde is under attack from within The ECB from staff who say they mistrust her. They clearly don’t understand their jobs or her role. Lagarde is a politician leading a political central bank. She has already achieved many of her goals. Generals don’t need to be popular – they need to be effective.

Markets expect a swift series of interest rates cuts will drive prices higher. They are fooling themselves. Inflation remains sticky. Central banks have a debt crisis to address while weaning the economy off the distortions of low-rate addiction. The scope for cuts is limited. Time to focus on what “higher for longer” real-rates and mean for market fundamentals.

The Fed is going soft, while the ECB and The Bank remain tough on rates and inflation. The market is watching the numbers, but the critical element is the need to normalise real interest rates to restore the functionality of the market economy.

Expectations of early interest rate cuts are high, especially as recession signals are set to rise through Q1 2024. Will Central Banks stay the course and normalise interest rates, or will be take the easy option of further low interest rate distortion?

Bond Markets are a wonderful thing to behold in full rally mode, but expectations of a swift return to lower rates depend on Central Banks playing ball, and nothing else changing. Experience shows things change quickly re inflation, rates and markets!

Markets thrive on competing perspectives, but trends after the strongest narrative. Rather than pray for early rate cuts to boost prices, maybe we should figure out what would be best for the economy?

Is inflation dead or just resting? Are rates likely to remain higher for longer, or are we poised on the edge of a bond bull market? Everyone is watching energy and tensions around the Middle East. I suggest we worry about wages as well.