Turn off the liquidity taps at the world's central banks and so does the ability of the market to believe seven impossible things before breakfast. That is why nearly all equity markets have had a horrible month. Almost all indexes are down -- by as much as 14 per cent over the last four weeks, and 24 per cent on the year. The only major markets in positive territory over a year are those in the US and Russia.

The surprising thing here is not so much that markets have tanked, but that, given that they are supposed to be discounting mechanisms, taking in and reacting rationally to all available information, it didn't happen sooner. US monetary tightening has not exactly been kept under wraps. The dual approach of cutting its asset holdings while hiking rates has been well advertised. The Chinese government's intention to attempt to deleverage has been no secret either. Nor has the tapering of quantitative easing in Japan or the intention of the European Central Bank to pull back from it completely. The ECB's asset purchases fell from €60bn a month in 2017, to €30bn in January, 2018. Its president, Mario Draghi, expects them to halve again in this quarter, with a view to ending them completely by the end of year.All this tapering and hiking might or might not be a good idea -- not everyone would necessarily want to tighten monetary policy in Europe at a time when the Germany economy is looking iffy and Italy is attempting to assert its fiscal sovereignty.

Whatever you think of it, there is no doubt that the liquidity lights, if not already off, have been dimming for some time. Suddenly what matters is not how much money is being printed, or when and where, but where we find ourselves in reality. In the case of stock markets, that means politics starts to matter again -- but, in the main, it means investors have to start focusing properly on cash and valuations.October shouldn't be seen as the end of the bull market (look at the annualised performance numbers for most markets and you will see that it ended some time ago). But this month can be recognised as the point at which the market shifts from being driven by liquidity to being driven by fundamentals

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