Investors might need to chuck out their text books, because markets seem set to move in unpredictable and potentially painful ways.

That’s the warning from Michael Hartnett, chief investment strategist at Bank of America Merrill Lynch, in his widely-read quarterly market wrap.

“It ain’t a normal cycle,” he and Jared Woodward write. After all, central banks around the world have cut interest rates 679 times and bought $14.2bn since the collapse of Lehman Brothers.

“Normalization” from a 5,000-year low in rates, 70-year low in G7 fiscal stimulus, 35-year high in the US-German rate differential, an all-time high US stocks vs. [the rest of the world], a 75-year low in bank stocks is unlikely to be peaceful; long gold in anticipation of potential manias, panics, crashes.

Well, when you put it like that…

Mr Hartnett points out that markets are “taunting skittish sceptics” by continuing to rally despite prophesies of doom, with another strong quarter where stocks rose 7 per cent but the dollar proved to the biggest “pain trade” with a 2 per cent slide.

We believe we are closer to the highs than lows in risk markets. But tops are a process; lows are a moment. The hubris, monetary tightening and macro peak that normally ends a strong bull trend feels H2 not Q2.

For now, he reckons US stocks could be on track to surpass even the tech bubble peak of 2000.

Among a clutch of investment themes, he argues that Europe is the “epicentre of the era of negative-yielding bonds”, leaving them at serious risk when the European Central Bank starts raising rates again, while contrarians may be tempted to buy sterling, where Brexit is now “much more priced in.”

You only live once.

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