FIRSTLY, my apology to those looking forward to a cruising travelogue, as the QE2 in this regard is the rather less nautical pseudonym for Quantitative Easing (QE).

QE is shorthand for governments printing money in order to boost liquidity in the financial system, keep interest rates low and hopefully boost economic activity.

It is arguably a financial tool of last resort, though recent conditions have required such apparent drastic measures.

The US economy remains a key driver of global economic growth and all eyes are watching to see if their second round of QE (QE2) is replaced with QE3 towards the end of this month.

The ambition is to end this easing as soon as possible, though recent US economic data is giving mixed signals as to the ability of the US economy to continue its recovery without this constant cash injection.

The danger of simply printing money is that it is deflationary and serves to devalue the existing currency, hence the recent downward path of the US dollar.

This downward path of the US dollar has boosted the value of numerous commodities, and assisted and partially driven the growth in developing countries and emerging markets.

The question is what happens if QE2 sails off in to the sunset?

One outcome could be a strengthening US dollar, a retreat in commodity prices and an easing of inflationary pressures across the globe and noticeably here in the UK.

As always, it is a delicate balancing act between ensuring sufficient economic growth to assist recovery in the world’s developed economies against creating an overtly inflationary environment that benefits no one.

Rising food prices may be an inconvenience in the UK, but is a matter of life or death for others.

The UK stock market has shown recent signs of anticipating this shift in policy with weakness in the energy and commodity sectors and strength in more defensive sectors such as utilities and pharmaceuticals.

This rotation between sectors is just about noticeable and self-balancing to some degree in terms of the overall market making progress.

Back in late April, I considered the old adage of “selling in May and going away”.

Today six weeks on, the net effect so far has seen the UK markets trend somewhat sideways.

We often talk of bull markets, those that tend to rise, and bear markets, those that tend to fall, though recent moves are more crab-like in nature, ie a tendency to move sideways.

The past six weeks has some familiarity about it when compared to both last summer, a year on from the credit crunch but with a similar outlook, and previous periods for markets following economic fallout of the magnitude experienced in recent times.

In the summer last year, there was a fall in the UK market of about 15 per cent as the uncertainty of a coalition Government took hold and economic policy became blurred.

Although it is too early to conclude, markets look likely to repeat last year’s pattern to some degree – the UK market is down four per cent since late April – and at the very least it looks increasingly likely that markets will repeat last year’s pattern of starting the autumn at the same level at which they ended in the spring. Perhaps a summer cruise away from the markets is not a bad idea after all.