Look for a North Star in volatile markets

IF we listen very carefully, we should be able to detect a strange popping noise in the market that we probably haven't heard for quite a while. This is the sound of bubbles bursting as overvalued assets implode from the threat of higher interest rates. Thing is, for the last decade or so, asset prices have been almost a one-way bet.

We could buy any old rubbish peddled by snake-oil merchants and expect them to rise. Their prices have been supported, though some might even say pumped up, through ultra-low interest rates and very generous monetary policy. Does anyone remember meme stocks? What about cryptocurrencies and spurious non-fungible tokens?

But at the end of the day, asset prices are a function of interest rates. Consequently, when interest rates were gradually reduced, the value of assets tended to rise. It's not rocket science. But the converse can happen as interest rates start to rise.