At a time when investors face the biggest credit crunch in a generation, what is puzzling is how little the world’s equity markets have been affected. As credit spreads blow out beyond August’s levels, it is perplexing to see global equities a mere 8 per cent off their 2007 highs.

Fixed-income markets tell a very different story: junk bond spreads have widened to levels normally associated with a US recession; real yields on US inflation-protected securities have plunged more than 100 basis points in less than six months and Fed Fund futures are discounting another 75bp off US rates in 2008.