The dreaded "1994 scenario."

In 1994, against the backdrop of a strengthening U.S. economy, the Federal Reserve surprised investors by hiking interest rates, causing a bloodbath in the bond market. The Fed was trying to ward off inflation – even though no real sign of rising prices had yet emerged.

Van Steenis says this concern was voiced by "every single long-term asset owner" that he met.

In a note to clients today titled "What I Learned at Davos," Van Steenis writes: