Instead, there are other dangers. One is the risk of secular stagnation, of low long-term growth in incomes and dividends. It's no accident that the fall in index-linked gilt yields has coincided with a slowdown in world trade growth; weaker trend growth should increase demand for bonds simply because it reduces dividend growth and interest rates, thus making cash and equities less attractive.
This, however, isn't the whole story. If it were, we'd expect to see high dividend yields on equities as investors require a high current income to compensate them for a lack of future growth. But this is only slightly the case: the dividend yield on the All-Share index, at 3.7 per cent, is only a little above its post-1990 average of 3.5 per cent.
There is, however, another risk - of a near-term UK economic downturn. This week's survey from Deloitte, showing a sharp drop in chief financial officers' confidence, confirms economists' expectations and the message of many domestic cyclical stocks such as housebuilders and retailers, that a recession is possible soon. This has reduced UK yields relative to others. Ten-year gilts now yield 0.6 percentage points less than their US counterparts - which is the widest negative spread for 10 years.
World trade growth and index-linked gilt yield
One mechanism here isn't merely the usual flight to quality that sees bond yields (and sterling) fall when investors worry about growth. Gilt yields have also fallen because investors are pricing in a chance that the Bank of England will resume quantitative easing.
There's a third thing. One virtue of government bonds isn't merely that they protect us from bad news about economic activity. Because the major government bond markets are so easy to trade, they also protect us from liquidity risk - the danger that previously liquid assets will become harder to sell. We've already seen this risk materialise in the UK with the closure of some commercial property funds. But there are signs that global investors are also worried about it. The US TED spread - the gap between interbank rates and Treasury bill yields, which is considered one measure of liquidity - has been trending upwards for most of this year.
The point here is not merely that there are good and worrying reasons why gilt yields are so low. It's also that short-term volatility is not the only risk that investors face. Just because expected market volatility is low does not mean that equities are safe. Far from it.
