US President Donald Trump has markets on a string. Photo / AP
It's hard to shake the notion that a decade on from the global financial crisis we must be due another. But that view is being challenged daily by equity rallies and fresh market highs.
In New Zealand the NZX-50 closed at 10,218 points yesterday — up nearly 16 per cent this year already.
The pessimists, who will be right eventually, seem to be on the back foot — again.
But let's be honest, the odds have been stacked, the jury rigged and the stakes raised for equity markets, here and around the world.
United States President Donald Trump has markets on a string.
Under pressure from Trump and a chorus of market commentators, the US Federal Reserve has retreated from long-held plans to raise rates — stinging the backside of a bull that was starting to look very tired.
The Fed no longer focused on a return to traditional monetary policy settings.
The impact of the U-turn has been felt around the world, shifting the game for central banks everywhere including our own.
After a shift in policy direction signalled in March, the Reserve Bank this month cut New Zealand's official cash rate to an historic low of 1.5 per cent.
Markets now seem dominated by just two things — neither of them related to company performance.
One is central bank policy.
The other is trade-war fears which are causing extreme swings. Markets are rising and falling on rumour, speculation and, of course, presidential tweets.
For local investors it is far from reassuring that the performance of our funds is so closely tied to the rate calls of the US Federal Reserve and the social media posts of a former reality TV star.
Given the links between the President's desire to pump the US economy through the 2020 election cycle, his public calls for lower interest rates, his trade war escalation, the subsequent US recession fears, inverting yield curves and inevitable Federal Reserve responses, a cynic might think ... well perhaps it's best not to think too much.
What we can say is that neither the US financial markets nor the President is happy with the Fed just putting rates on hold. They want them lower to further boost equities.
Last week the US Treasury yield curve inverted again — with 10-year yields falling below three-month yields.
Famously a predictor of recession, the yield curve also inverted last year resulting in the big sharemarket fall.
From October to December, US shares fell close to 20 per cent — the bench mark for a bear market.
Last year the yield curve inversion reflected fears that rising interest rates would squeeze the life out of the US economy. This year the inversion seems to be driven by fears that prolonged trade war will snuff out economic growth.
But trade-war tariff pressures aside, the US economy remains in good shape, job growth has been strong and company earnings have been solid.
In more orthodox times there seems little reason why rates could not have kept rising — let alone grounds to be cutting again.
Yet the market is now pricing in one rate cut and there is talk in some commentary of as many as three cuts in the next year.
Of course, as harrowing as all these monetary policy swings and global political stand-offs might be for investors, we can't ignore the fact that, so far, it is playing pretty well in this part of the world.
New Zealand seems to be benefiting from some of the collateral damage in the trade war stoush. For now at least, with China's economy still bearing up on state stimulus, prices for our export commodities remain strong.
The broader slowdown in world trade doesn't seem to have dampened demand for meat, dairy or wood. And the local market — packed as it is with dividend yielding domestically focused stocks — seems to be viewed as something of safe haven, outside the direct firing line of the trade war.
The NZX-50 has this year held up better than its peers in the face of trade-war slumps and has joined the rallies on the good days.
In fact with the latest stand-off over Huawei's use of US tech, including Google, Asian markets have fallen to near four-month lows.
The NZX-50 has hit fresh records - rising above 10,250 points on Tuesday.
But for those of us who might prefer a less volatile investment environment, grounded in the ups and downs of revenue growth and cost control, none of this is particularly reassuring.
These are strange times. There is a surreal nature to the returns we are seeing, detached from any obvious economic boom.
Through it all we can only hope that local management teams remain steadfastly focused on more tangible metrics — even as they watch company valuations soar.
Internal performance still matters and that's still tied to sound management choices.
One fears for a generation of KiwiSavers that now sees double-digit returns as the norm.
But if companies keep watching the bottom line and delivering dividends or growth targets then they will retain value whatever global market fortunes bring.
Meanwhile we'll keep following this real-world Game of Thrones knowing we have more than a little staked in the game.
●Liam Dann is the Herald's Business Editor-at-Large
Dairy export revenue has lifted 16% to a record $27 billion.