QE isn't a panacea for economic troubles

A CURIOUS - eerie almost - calm seems to have descended on financial markets which, if one were an optimist, one might regard as a sign of market maturity or acceptance that the purpose of portfolio investment is not to get rich quick but to nurture long-term growth and development. A pessimist might see the situation as the calm before a brewing storm.

Whichever way you look at it, there is something distinctly odd about the situation. Economic growth has slowed to a trot rather than a canter yet investors keep pouring money into equities, which are supposed to be bets on future growth. Central banks keep pouring liquidity into the system, yet liquidity in some market sectors is said to be dangerously lacking.

Deflation continues to be perceived as a greater threat than inflation despite central bank largesse; unemployment looms as a real and present threat; commodity prices are soft (despite some recovery in the oil price); geopolitical tensions are rising, and key trade indicators like the Baltic Dry Index of shipping have hit a 30-year low.