Investors are starting to realise that Sunday's Greek election result was about the worst outcome they could have ended up with.
If Greece had out-and-out rejected austerity, we'd have had some panic - but we might have had some progress too.
Faced with plunging markets and the threat of an imminent Greek exit, central bankers around the world would have had their fingers poised over the print' button. Perhaps the Europeans might even have felt a bit of pressure to make something resembling a concrete decision.
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As it stands, Greece's indecision has left markets in limbo. Things aren't great, but the threat of a Lehman moment has passed. That means central bankers just can't justify another spending spree.
Federal Reserve chief Ben Bernanke still tried to toss investors a bone last night. But the market sulkily spat it right back at him
The Fed hasn't pressed the emergency button - yet
Instead of printing more money QE3 the Federal Reserve has opted to extend 'Operation Twist', which was originally meant to finish at the end of this month.
Twist' involves the Fed trying to keep longer-term interest rates down; it does this by selling short-term debt and using the funds to buy US Treasuries with maturities of six to 30 years.
So Twisting' doesn't add more money to the system, it just takes it out of one end and puts it in at another. Trying to suppress interest rates over a longer period should "help to make broader financial conditions more accommodative," as the Fed puts it - but it doesn't provide the caffeine jolt of fresh new money that the markets clearly crave.
Investors probably shouldn't have been as surprised as they were - the fact is, things just aren't that bad yet.
We seem to have forgotten that quantitative easing (QE) was at one point a potentially deadly monetary experiment a desperate measure designed to prevent the complete collapse of civil society. Now every time the S&P 500 looks like losing a few points, or a bit of bad economic data comes out, it's a case of "let's just whack a little more plutonium in the fuel tank".
The US is certainly slowing down, there's no doubt about that. Fed officials cut their growth estimates for the US quite sharply: they reckon it will grow at between 1.9% and 2.4% this year, rather than 2.4% to 2.9%. And there are plenty of smart people who think that the US is already in recession and has been for a long time (although this uses a broader definition of recession than the usual two shrinking quarters in a row' notion).
However, while growth concerns are real, the Fed needs a more concrete panic phase to launch anything as drastic as QE3 - amore rebellious Greek vote, sparking a rush for liquidity and a sharp market plunge, might have done it. As it is, investors have gone from fearing the end of the world last week to being paralysed with indecision.
They're too afraid to buy in case something nasty happens. And they're too afraid to be out of the market because if something nasty happens, they think that policymakers will flood the world with money.
Investors are right to be nervous
As far as I can see, investors are right to feel indecisive. It's possible that the US economy doesn't need' QE3, but Ben Bernanke will take any excuse he can get to err on the side of caution.
And he'll probably get that excuse later in the year, as my colleague Matthew Partridge has suggested. The economy is slowing down right across the globe, not just in Europe and the US: China saw manufacturing sector activity shrink for the eighth month in a row in June.
As a result, life is getting tougher for companies. The latest company to warn on profits is US consumer goods giant Procter & Gamble. Some of its woes are self-inflicted, but the wider picture is pretty grim too.
As James Mackintosh notes in his FT column this morning, operating profits globally are "now falling at an annual rate of 5%". That's similar to the sort of fall seen at the start of recessions in the 1990s and the 2000s.
Combine all this with the potential for an ongoing, rolling panic in Europe, and Ben is bound to come up with a reason to provide more QE.
As we noted earlier this week, that's a good reason to hold on to gold as insurance. I also think that there's no rush to get out of high-quality stocks with sturdy balance sheets and nice dividend yields. Sure, they aren't the most exciting stocks in the world, and it's hardly a contrarian bet, but getting a decent income from a company that is as solvent as any company can be is a pretty attractive option, particularly when you look at the alternatives.
And if you're looking for an easy way to build a nicely diversified but sturdy portfolio, you should look at my colleague Merryn Somerset Webb's cover story in the current issue of MoneyWeek magazine. She selects her favourite six investment trusts to construct a model portfolio it's well worth reading, particularly if you have never considered using trusts in your portfolio before. If you're not already a subscriber, subscribe to MoneyWeek magazine.
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