The Bank of England has given its strongest hint yet that interest rates may rise before the year is out, leaving investors wondering what it means for their portfolios.
At its most recent meeting, two of the nine Monetary Policy Committee members voted in favour of raising Bank Rate, which sparked a flurry of activity across investment markets.
With interest rates having been at rock-bottom lows, many have positioned their investments to reflect that. But if the tide is turning, and rates do rise, which investors will it affect?
Anthony Gillham, the head of multi-asset funds at Old Mutual, said: "Everything - from bonds and equities to currency - has become very dependent on what the central bank does."
Indeed, speculation after the Bank's meeting saw sterling hit a year-high against the dollar, the FTSE All-Share index of UK companies drop more than 40 points, government bond, or gilt, yields leap and the oil price top $50 a barrel for the first time in a month.
Experts are now estimating a 50pc probability that the first rate rise in almost a decade could come before the end of this year. So what does it mean for investors?
Battle of the bonds
This asset class has been incredibly popular since the financial crisis because bonds pay a set level of income - an appealing characteristic in times of uncertainty.
When Bank Rate is at a rock bottom of 0.25pc, by comparison a yield of 1pc from a government gilt seems attractive. However, if interest rates start to rise, that income stream starts to look less attractive. Many investors will find they have locked into a negative return in real terms.
But any rush to the exit might be a buying opportunity. If investors rush to sell, prices would probably fall, forcing the yield up. While that's bad for sellers it could be a good time to buy, especially if the market settles and the yield reverts to where it was previously.
Mr Gillham said: "We're not going to sell all our government bonds, there is a place for them in investment portfolios. Gilt yields climbed around 0.3pc on talk of rate rises, so it could be a good tactical opportunity to buy some."
Investing in a strategic bond fund, where the fund manager has the freedom to invest in a mix of quality, high-yield and government bonds, is a good way of lowering risk.
Experts we regularly consult like Artemis Strategic Bond, whose managers decide where to invest by analysing factors such as interest rates, inflation and the credit rating of the bond. It has returned 17.5pc over three years.
Timing is everything How quickly interest rates rise is key to what investors should do to prepare. A gradual raising of rates, which is expected, should not hurt the stock market but steep hikes could spark a major correction.
Simon Evan-Cook, manager of the Premier Multi-Asset Global Growth fund, said rates rising significantly was a threat that could see investors flood out of the market in favour of the safety of cash.
He said: "If you can earn 5pc on cash in the bank then it's not as tempting to take the risk of investing in equities."
The assets most likely to be hit in this scenario are those that have performed exceptionally well since the crisis. That includes so-called "bond proxy" stocks - the quality blue-chip companies that have paid a steady dividend over recent years.
Mr Gillham is looking to firms that haven't had a good time but whose business models can benefit from higher interest rates, such as banks. They have spent years getting their house in order, so should benefit from rate rises.
With so much uncertainty in the UK, many professional investors are looking elsewhere.
Anthony Rayner, co-manager of the Miton Cautious Multi Asset fund, which invests across a range of asset classes and countries, said: "The UK is too difficult: at the moment we have very little there.''
The fund, which returned 28.4pc in the past three years, has just 7.6pc of its assets in UK stocks. Mr Rayner likes Brazil, where falling interest rates are boosting consumer spending, and India, where strong demographics are driving growth in consumer companies and banks.
Mr Evan-Cook thinks equities outside America are attractive. "As long as you take a long-term view and accept there will be bumps along the road, you should make decent returns from equities in Europe, Japan and Asia."
Mr Rayner likes trends such as the rise of the electric car, which he taps into through Chinese tech firms, and the ageing population, which he backs through medical device firms.
What if there's no change?
The Bank reduced interest rates only last summer, when the base rate was halved to 0.25pc after the result of the Brexit referendum. The first interest rate rise would probably only reverse this move.
Andrew Moffat, co-manager of the Marlborough Extra Income fund, explained: "We are not changing our investment strategy. The Bank doesn't want to go into the next downturn with interest rates at zero but I don't think rates will rise significantly."
Others say high inflation - the main reason a rise has been called for - has been caused by the weak pound rather than prices of food or clothing rising. But sterling has made a lot of ground just on talks of a rate rise.
Mr Gillham said: "If [Bank Governor] Mark Carney can achieve his aim of bumping the pound up by just talking about a rise he'll have done a good job. But that means changing your investments is less urgent."
However, if sterling continues to strengthen, that could be a problem for the 70pc of earnings in the FTSE 100 index that come from overseas.
He added: "Moving into smaller and medium-sized companies, which are more domestically focused, might be a better option."