In search of safety
Understandably, then, people are starting to look away from Europe to invest their hard-earned pennies. A logical destination, it would seem, would be emerging markets.
After all, countries such as China and India continue to grow at break-neck speed, and the effects of the crisis on them seem relatively slight. So it would make sense to invest in these emerging nations. In fact, you would expect these developing-country stock markets to have decoupled from the feeble West.
But in reality, nothing could be further from the truth. What has actually happened is that shares in stock markets from São Paulo to Shanghai have been hammered just as much as, or even more, than shares in London and Paris.
Stock markets around the world have moved pretty much in lock-step with each other. The whole asset class of shares has moved together.
An apparent decoupling
The latest figures for his fund are pretty gruesome, with its net asset value falling by 29% in the six months to 30 September, which was even more than the MSCI China Index, which fell 25%. China has not decoupled from the West's troubles -- in fact, it has done worse.
As Bolton admitted: "Asian markets in general have fared less well than developed markets as investors have reduced risk and I have been wrong so far in my expectation that China's stock market could decouple from the West."
Yet there was a time, in the early 2000s, when emerging-nation stock markets did outperform developed-nation stock markets. The BRICs in particular were impressive performers during this period, while mature markets endured a torrid time in the aftermath of the tech boom of the 1990s.
During this phase, there was much talk of 'decoupling'. With powerhouses such as China and India growing their GDP at a rate of 8-10% per year, their economies certainly had decoupled from the sluggish growth of the developed world.
And amid the euphoria as their stock markets rocketed while those of the West slumped, it seemed that the BRIC markets really had decoupled as well.
But it's not as simple as that
But that decoupling was not as simple as it first appeared. I think the emerging-market boom of the 2000s took place because of a difference in valuation. Quite simply, emerging markets were cheap following their own problems of the late 1990s, while mature market shares were expensive. So the former rocketed while the latter struggled.
Fast forward to today and we have a situation where valuations have largely evened up. And now when developed-world stock markets fall, developing-world stock markets fall, too. And when you think about it, that makes sense.
After all, where does most of the money that goes into these emerging stock markets come from? Well, the developed world, of course -- the bulk of pension funds, investment banks and private investors are based in mature markets.
So in a downturn, emerging markets are vulnerable to capital leaving the economy as risk aversion rises and investors withdraw cash. For this reason, if anything, emerging markets have actually done rather worse than developed markets.
This will not change until a true investment culture is fostered in these developing countries. And I suspect that will not happen for a good few years yet. Let me put it another way: when do you think we will see a Motley Fool in China?
The fact is that we live in a globalised, interconnected, intertwined world. So a parliamentary vote in Athens really can reverberate in stock markets in Hong Kong and Mumbai. And these days, emerging-market decoupling really seems no more than a myth.