With Greece out of the spotlight and the summer holidays over, investors have returned to worrying about the first rise in US interest rates and the volatility this could bring to their investments.
It is understandable to fear a change of policy regime, but investors may be worrying about the wrong things.
In fact, it will be very good news for the global economy if interest rates finally start to rise in the UK and the US. If markets become bumpier after years of being artificially depressed, that would be healthy as well.
What we should all be worried about is not a short-term rise in interest rates, but a long-term decline in the world’s potential growth rate.
Looking back, the FTSE All-Share Index has delivered a total return of 91% since the start of 2009.
The main US stock market index has been closer to 160%. Even money invested in US government bonds has grown by more than 33% in six years.
These gains are in stark contrast to the performance of the real economy – not to mention average wages. Real average earnings in the UK shrank by nearly 7% between January 2009 and January 2015.
But this is starting to change.
Real wages are not growing nearly as fast as they have at this stage in previous recoveries, but they are starting to pick up on both sides of the Atlantic.
Business investment and employment are also on the rise. All of these together are helping pave the way for the first rise in US policy rates in nearly six years.
The momentous decision might come early in the autumn – or it might be a little later given recent market volatility.
But the exact timing of the change in rates matters less than that it happens at all.
