We often hear and see the word "goldilocks" used to describe conditions in financial markets or economies. In the years after the GFC, the actions of global central banks created a goldilocks-type environment.

Investors have become enamoured with the inference of "not too hot, not too cold, but just right," leading to high levels of complacency and low market volatility. Markets have surged to record levels.

Perhaps it is worth noting the Goldilocks story involved bears. When the bears discovered Goldilocks sleeping in baby bear's comfortable bed with a belly full of warm porridge, she was shaken from her complacent surroundings, screamed "Help," and ran for the exit.

The lesson to be learned--always make sure you read the story to the end, and in case of a surprise, have an exit close by. Ensure when the bears, claws extended, return to financial markets as they will, you are prepared and won't have to cry "Help".

Could Powell's "gradual" include four gradual increases in 2018?

The chairman of the US Federal Reserve Jerome Powell provided a relatively optimistic outlook for the US economy in his maiden testimony to the House Financial Services Committee but pointed to balanced risks to the strong outlook.

In his prepared speech, he largely stuck to his predecessor's mantra of a cautious approach and reiterated earlier policy guidance of gradual increases in official interest rates, in line with the December Dot Plot.

In response to questions he did, however, acknowledge recent data had boosted the case for near-term hikes. Financial markets have priced in a 25-point increase at the next meeting of the Federal Open Market Committee (FOMC) on 20-21 March.

Powell admitted in three weeks every member of the FOMC will submit "their projection of what they feel is going to happen to the economy and their projection for appropriate monetary policy". At the December meeting the median participant called for three rate increases in 2018.

Since then, incoming data suggests the economy has strengthened and there has been a major increase in fiscal stimulus. Powell refused to prejudge what the new rate path may look like, but markets are slowly moving toward the possibility of four increases in 2018.

The Fed chairman brushed aside any suggestions the recent spike in market volatility would have an impact on the economy. He pointed to the tailwinds of favourable trends in consumption and business investment, and more stimulatory fiscal policy since December.