The story seemed so simple at the start of the year. Shares were rallying on optimism about a world economic recovery; US and German bond yields were widely expected to edge higher as the Federal Reserve tapered its asset purchases, or quantitative easing. Investors positioned accordingly.

But then the narrative took unexpected and disconcerting twists. Five weeks into 2014 and markets are reeling from renewed turmoil, especially in emerging economies. The FTSE All-World index is down almost 5 per cent, while Japan’s Nikkei 225 index has dropped 13 per cent. Rather than rising, yields on 10-year US Treasuries have dropped almost half a percentage point – a big move in a usually stable market.

So what went wrong? Investors have been offered many different explanations (which has probably added to their nervousness), with central banks’ historically unprecedented monetary policy experiments significantly confusing the plot. Market volatility points to surging investor uncertainty over whether this is just a correction – or the early phases of the next financial crisis.