Return of risk is root cause of market shock

AT first glance, the present sell-off in equity markets may be attributed to three factors - weak oil, which indicates soft global demand and hence is a harbinger of poor growth; the worry of deflationary forces being unleashed, especially in Europe, that could then lead to "Japan style" lost decades of growth; and a drastic slowdown or possibly hard landing in China that would feed into already slowing growth and spawn a global recession.

These are all valid concerns but they are not new. The slid…