Fears of a global recession and a financial system crisis in Europe are driving markets lower, says Matt Sherwood, head of investment market research at Perpetual Investments.

“The only assets that have risen are bonds and gold,” says Sherwood. “I think it’s going to continue with heightened uncertainty.”

The economic stimulus cupboard is bare, he says. Interest rates are near zero in major economies. Governments seem reluctant to spend because of fears budget deficits will expand.

“The only policy left is quantitative easing but inflation is on the rise,” says Sherwood.

“At the moment there is market irrationality, more hysteria than anything else.”

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