Is this turning point in markets the real thing? Watch the Federal Reserve to find out

The other morning, I read a comment piece in the FT by Janan Ganesh, talking about the impact of Donald Trump's election victory.

It was a "calm down, dear" piece (that's my official editor's jargon for the "backlash" pieces you see being trotted out at times of high drama).

The writer gets to pose as a laconic, worldly-wise poet philosopher, marvelling at the rest of the world (typically as represented by his own paper's front page headlines, and the columnist they had on the day before) losing its mind over a scary, but rare, incident.

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Terrorist incidents and other frightening crimes always generate reams of "calm down, dear" pieces. Now our political picture is doing the same.

Broadly speaking, Ganesh's take was that Brexit and Trump represent behavioural blips, rather than fundamental turning points in the political narrative.

But much as I'd like to agree with him genuine change is always rarer than we think it's not the story the markets are telling

What if the US Federal Reserve changes its mind?

Meanwhile, the rest of the world was struggling. Europe was still in the mire, Japan was heading for negative interest rates, and the UK was busy squabbling over the pre-Brexit vote.

So why wouldn't you have bet on the dollar to keep rising? It made a lot of logical sense.

However, this argument reckoned without one thing the Fed.

You can say what you like about the Fed (and I often do), but it's not naive. It knows what side its bread is buttered on.

Ben Bernanke spent his whole career arguing that the Fed caused the 1930s depression by being too quick to tighten monetary policy. If there was one mistake that Janet Yellen was going to avoid making, it was that one.

As I've said before many times, a stronger US dollar tightens monetary policy around the world. The effects of that were being seen at the start of this year, when everything was starting to collapse.

So the Fed abandoned concerns about inflation, and paid attention to the markets and the exchange rate. Yellen peddled back hard on the idea of raising rates, and when the dollar weakened as a result, markets breathed a sigh of relief.

I said at the time that this would happen, and that's how it turned out. And I continued to expect the Fed to maintain a bias towards keeping rates low, the dollar weak, and to not pay any attention to inflation until it was way too late to do much about it.

Now, I'm not saying this to blow my own trumpet (I get plenty of things wrong, too). I'm saying it because while that was a fair description of how things were working before the election result, I'm not sure it holds anymore.

And if it doesn't, that has some major implications for what happens next.

Watch out for passive-aggressive central bankers

Meanwhile, China's renminbi (or yuan) weakened for the tenth session in a row against the dollar. That's the longest losing streak for the yuan on record.

So far, the market has been shielded by a sort of exuberant confusion, as gobsmacked investors and analysts alike collectively look on the bright side of a Donald Trump victory. But as I mentioned the other day, the market environment is starting to look a lot like it did in January this year.

The big question mark now is: will the Fed step in to save the market's bacon?

And the big difference between now and January is that I'm not sure that it will.

The other day, Bank of England boss Mark Carney told politicians what every other central banker has been thinking. To paraphrase: "This is your mess. Stop trying to pass the buck to us to sort it out."

Central bankers are only human. They notice that they're increasingly the target of voter anger and that this is something that's also being encouraged by the politicians who are now in power.

They don't like it. And one way to react to that, is to throw their hands in the air and say: "Fine. You want higher rates? I'll give you higher rates."

We'll need to see what happens at the next Fed meeting. If the Fed doesn't raise rates, then that'd be a very clear sign that Yellen is still in "save the world" mode. If the Fed does raise rates (as widely expected), but sends out dovish signals, then yes, she's probably still got Bernanke's warnings ringing in her ears.

But if the tone changes if there's a hint of aggression in there, suggestions that inflation might be an issue then watch out. That'd be a big shift. That'd be the Fed handing over responsibility to Trump, and implicitly saying: "You want to risk a depression? On your own head be it."

Trump has made the European Central Bank's job easier

The weaker euro and rising bond yields make life easier for the European Central Bank (ECB) in particular. The ECB was in danger of running out of decent bonds to buy for its quantitative easing programme, due to the collapse in yields across the board.

But now as the FT reports the quantity of German bunds eligible has doubled to around €600bn, compared to where it was six weeks ago.

So I'd stick with eurozone equities (though not bonds) for now, despite the havoc looming over the coming months. Just don't expect a calm ride.