Investors might want to reread Douglas Adams. “We have normality,” trilled Trillian in Hitchhiker’s Guide to the Galaxy as the effects of an improbability-driven spaceship wore off. “Anything you still can’t cope with is therefore your own problem.”
Markets seem to be returning to normal. World equities were yesterday up 20 per cent from their autumn closing low, the usual definition of a bull market. European bank bonds, the Vix index of expected US equity volatility and short-term Italian and Spanish bonds are all back to where they stood in July before the eurozone crisis intensified. Even investors in junk bonds have made back their losses, although yield spreads remain elevated.
Assessing the appetite for emerging markets is harder but a useful indicator is the premium of domestic Chinese shares over otherwise identical H shares listed in Hong Kong. Capital controls segregate domestic and foreign investors.