MacroscopeWhy 2016 will be far tougher for policymakers than for investors

Judging by last week’s trading performance, it has not been the best of starts for global markets and the worry is that it sets the tone for another troubled year. Stock market mayhem and rising investor unease is not good news when the pace of global growth is starting to stumble.

It is hard to credit after seven years of stock market rally that the bubble is about to burst, especially considering the world economy is so flush with liquidity after years of monetary pump-priming by the major central banks.

Ever since the global financial crisis first exploded onto the scene in 2008, world policymakers have waged a fierce policy offensive with quantitative easing, ultra low interest rates and a plethora of super-stimulus to get the world economy back on its feet. Despite all this monetary balm, markets seem to have reached a crossroads.

The special measures have either run out of steam and fresh policy efforts are needed, or else global stock markets have reached their natural peak and are set for a corrective downward spell. It is a combination of both, plus the fact that the global economy is still experiencing painful aftershocks from the global financial crisis.

READ MORE: This is why 2016 will be a dangerous year for investors

Reverberations of deep recession, deflation, high unemployment, austerity cutbacks and severe balance sheet restructuring are still resonating. Years of easy money from the global monetary authorities might have averted deeper disaster in the immediate aftermath of the 2008-9 financial crisis but the world economy is still far from fixed.

Stock market uncertainty is telling the world’s economic leaders some important truths. Stock prices are leading indicators of investors’ future expectations. If share markets are distressed, it means confidence in the future has been undermined. Investors selling assets is the only way to limit anticipated risks ahead.