Investors are focusing more on politics and have become more selective in what they buy, the Bank for International Settlements said on Monday in its latest signal that markets may be breaking free from a dependence on central bank support.
The BIS said in its quarterly report that there had been increased discrimination across asset classes, regions and sectors, in contrast to the cross-asset "herd behavior" that has characterized recent years.
"Politics tightened its grip over financial markets in the past quarter, reasserting its supremacy over economics," the head of the BIS' monetary and economic department, Claudio Borio, said.
The BIS, often referred to as the "central banks' central bank," acts as a forum for the world's major monetary authorities. Its commentaries on global markets and economics give an insight into policymakers' thinking.
Borio called the drop in correlation between asset classes a "precipitous" one. Donald Trump's U.S. presidential election win had triggered so-called reflation trades that have seen Wall Street surge and both the dollar and U.S. government bond yields stay high.
"It was as if, after an unexpectedly rich meal, investors had to take their time to digest it,” Borio said. “As a result, central banks once more stepped back from the limelight."
The report also touched on the political uncertainty in Europe, where upcoming French, Dutch, German and potentially Italian elections are influencing sentiment.
Euro zone government bond spreads, such as those between France and Germany, have widened. This has also drawn attention to the growing imbalances between weaker and stronger euro zone members in the European Central Bank's TARGET2 payment system.
However, the BIS found that the latter had more to do with the mechanical effect of ECB's large-scale asset purchases and that there was no such relationship with credit default swap spreads that investors buy as a protection against default.
Research by two BIS economists, meanwhile, struck a note of caution about the degree to which consumer-led growth was driving key economies like Canada, China, France, India, Italy, South Africa, Britain and the United States.