It's exactly two years since I wrote my first column in IPE. In it, I asked whether the OECD could grow enough to support its pensions. "Pension funds will almost certainly have to increase allocations to emerging markets."

At around the same time, PIMCO coined ‘The New Normal' to describe the long process of restructuring and weak growth that the developed world faces, coupled with rising prosperity in the emerging world. Of course, a bonds behemoth arguing for rapid economic recovery would be like the proverbial turkey voting for Christmas - but as emerging markets got the bigger bounce from 2009 lows and benchmark bond yields sank ever, improbably, lower, many became resigned that ‘The New Normal' was, well, the new normal.

Then the great rotation started. Emerging markets underperformed through the second half of 2010. Yields edged up. Rising commodity prices began to bite and European investors started thinking: ‘If we feel it in economies with relatively low demand for raw materials, how must it feel in China?' Developed economies are seeing multi-year peaks in business activity. Germany, with its terrible demographics, nonetheless seems perfectly positioned, while North Africa finds out what happens when you mix authoritarianism, sky-high food prices, unemployment and supposedly healthy demographics.

Markets have reacted sharply. The US 2-year yield leapt by 32bps to 0.86% in the first week of February. Germany's rose by 66bps over the same week. Investors fell over themselves to buy European Financial Stability Facility bonds and, through January, the spread of Spain over Germany at 2 years almost halved from 302bps to 178bps. Take out Austria and the best performing MSCI country equity indices for the past three months are Spain (+25%), Ireland (+24%), Italy (+24%) and Greece (+23%). The worst? You guessed it - Egypt. But second worst is India (-9%). China is down 1.7%. Commodity prices have kept Brazil (+1.3%) and Russia (+19%) in the black.

As liquidity gets withdrawn (via rate hikes and global investors), we may start to find out what the emerging corporate and consumer is really made of. Even dedicated emerging market investors are changing tack: Barings, for example, has ‘refocused' its GEM portfolio on companies exposed to global growth rather than local consumers.

So should European institutional investors be heading back home? Let's not resurrect the ‘Old Normal' just yet. Bond yields still look very low (unless you are still in your 20s or well into your 60s). Germany's competitiveness (built on emerging market demand) is as problematic as it is attractive, as long as the southern EMUs continues to worsen. And then there are those demographics: it seems significant that Egypt's disaffected (of all ages) found a new totem this week, in a 30-year-old Google executive.

A globalised economy demands a global investment strategy, and most European investors are still rebalancing their portfolios to reflect that. At times like these, the price may be right to do so.