It’s tempting, with the European Central Bank toying with quantitative easing, to believe the rally in asset prices will continue indefinitely. But the risk of a painful lurch across risk markets is ticking higher. Bond and equity valuations are stretched and volatility is close to record lows.

The culprits are the central banks, which have artificially suppressed volatility. Take the Bank of Japan today - by buying 70% of new Japanese government bonds it makes the market smaller, reduces the number of market participants and reduces their room for manoeuvre in terms of price. Central banks have successfully driven long-term interest rate expectations to a low level and this has reassured investors they can buy and hold, rather than trade to avoid risk and gain advantage. The market is so dominated by one long-term view on interest rates that the impact of a change in this view is likely to be profound.