Central bank policy will increasingly start to reflect this changing outlook. For investors, diversification across different asset classes is likely to become more important in this environment.

Flanders believes that investment in stock markets makes sense. She adds: “Central banks may be tightening policy, but they still want more inflation and more growth. The Federal Reserve is still biased towards reflation. However, people should not expect the type of returns seen from equities over the last few years.”

“Equities look cheaper than most of the alternatives. However, they are not cheap and therefore returns are likely to be lower. In the US. there is less room for returns from higher multiples (of earnings) on a forward looking basis.”

She remains concerned about the Eurozone, believing the region may be nearing a crunch point that will see it either decline further, or pick up significantly. She adds: “I don’t think the Eurozone is about to slip into recession. However, the current economic weakness makes it more vulnerable to any shocks.” She gives the example of the Ukrainian crisis as something that could be potentially destabilising for the region.

Interest rate rises are likely to be sooner, but slower in the UK. The UK economy remains more vulnerable to interest rate rises, says Flanders, given its high debt levels and its shorter-term mortgage deals.

The biggest concern is that the global economy has fewer tools with which to weather any external shocks. For example, without any normalisation of monetary policy, a recession could be deeper and more prolonged.