Have we finally reached the turning point where the world economy starts staging a comeback? With coronavirus lockdowns easing in many countries, businesses slowly getting back to work and the world hopeful of a return to normality soon, it’s no surprise that stock markets have been in a more positive mood lately. But is it just a chimera of recovery and are investors simply jumping the gun? After all, there are precious few signs of recovery evident in any of the real economy numbers emerging from the major economies so far. The worry for investors is that this is a stock market recovery based on nothing more than wishful thinking that better times are just around the corner. Until consumers start going on major spending sprees, businesses begin to invest and financial conditions settle down, then we are all skating on thin ice. In the early phases of the coronavirus crisis, we quickly became accustomed to a barrage of ever-worsening news about the world heading into a catastrophe, the likes of which we had never seen before. With some forecasters speculating about the risks of a global crash worse than the 1930s Great Depression , it is no surprise that world stock markets took a bad beating in the early days of the global outbreak, with equities losing as much as 35 per cent of their value since the crisis first struck. But with the MSCI world stock index now back to within 12 per cent of its pre-crisis highs, clearly investors are hoping the worst is over and the world is on the brink of recovery. There are still lots of unknowns, not least the lack of a fail-safe cure for coronavirus, the failure to bring the US-China trade war to a conclusion and the growing friction between the United States and China when nations should be working more closely together. Yet there is good news out there, not least the huge amount of stimulus being thrown into the world’s recovery efforts right now. Global interest rates have fallen towards zero, central banks are flooding the markets with liquidity, taxes are being cut and deficit spending is rising, while most policymakers are doing their utmost to turn things around. Once the pandemic is contained and a cure for the virus is found, the world should be more than ready for a comeback. China-US ties: from ‘same bed, different dreams’ to a break-up over Hong Kong The best places to see early shoots of recovery are the economies of China and Germany. These are the workshops of the world, the two largest export-surplus nations and the places where any uptick in global demand is likely to show up first. In the months since global industrial output ebbed into stasis, the world’s inventory has gone down to critically low levels and it needs to be replenished again. As demand rises for consumer durables, machine tools and investment goods around the world, China and Germany should be at the forefront of recovery. The signs are that the world might have already passed the weakest point and that global confidence could soon be on the mend. Last week’s bounce in the Ifo Institute’s German business climate index certainly provided one of the clearest clues yet for the recovery of business optimism in Europe’s largest economy. Ifo’s expectations component showed a very solid rebound to 80.1 in May from an all-time low of 69.4 in April. Germany may be stuck in recession after two successive quarters of negative growth, but at least German businesses are starting to see light at the end of the tunnel. In China, the National Bureau of Statistics’ latest purchasing managers’ index showed activity moderating to 50.6 in May from 50.8 in April, but still in positive territory above the boom-bust line of 50. The odds are that China’s factory sector hit bottom in February and is slowly bouncing back. Progress might be fitful but a positive uptrend should prevail. Looking at the recovery from the 2008 global crash, the global economy responded extremely well to the monetary and fiscal stimulus applied at the time. There is no reason it can’t happen again. The coronavirus crisis has caused a severe shock and the market sell-off has been vicious, but the subsequent policy response will eventually yield results. This week’s US employment data for May is likely to look discouraging, but investors should find comfort in the encouraging trends starting to emerge in China and Germany. The global downturn is bottoming out, recovery is imminent and investors are right to be optimistic about the future. David Brown is chief executive of New View Economics