Markets love buzzwords, the latest being "the Fiscal Cliff", which mentally summons up either a place in Ireland by the sea, or for those of us involved in financial matters, a pretty bad economic scenario. It will come up two or three times in any summary of the state of global finances but does refer specifically to the US.

So what is the Fiscal Cliff ? 

Before his re election, President Obama had huge differences with congress over the manner in which the US would handle the reduction of its huge debt mountain and budget deficit. These differences still remain, one of the reasons that markets have turned negative after his re election but if no solution can be found that is acceptable to all sides, preset budgets cuts and tax increases will activate to reduce the budget deficit, from 2013 onwards. These cuts will amount to around US$ 500 billion.

This is basically the Fiscal Cliff and markets are worried about the effects of these cuts on the US, that could tip the US into recession and the knock on effect on world markets.

The hope is that all parties will sit down and negotiate a more reasoned solution but until evidence of this happens, equity markets will stay weak, vulnerable to a substantial sell off.