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 slide in oil for example, extends back almost 18 months when the price for Brent crude fell from US$110 per barrel in June 2014 to US$60 six months later, while deflation in Europe and China's potential hard landing have been worries for at least two years now.

A fourth concern, higher interest rates, has also been heavily discussed ever since mid-2014 when the US Federal Reserve started tapering its quantitative easing (QE) monetary stimulus programme.