But it is not only bond markets and housing markets we have to keep our eye on. Stock markets are an important issue as well. In 2013, there was only one way for most stock markets to go, and that was up.
The EuroStoxx 50 increased by 18%, the FTSE 100 by 14%, the Dow Jones by 28%, and the Nikkei skyrocketed by as much as 57%. The BIS notes that, “As the search for yield expanded to equity markets, the link between fundamentals and prices weakened amid historically subdued volatility and low risk premia”. Market volatility indeed decreased, and reached historically low levels.