The global downturn is bottoming out and optimists are right on the money
Germany and China are the workshops of the world, and the best places to see early shoots of recovery. The latest German business sentiment data and Chinese factory numbers suggest that better times might be around the corner
David Brown is the chief executive of New View Economics.
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.
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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.
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Traffic builds again in Vietnam, Thailand and Myanmar as coronavirus measures gradually ease
Traffic builds again in Vietnam, Thailand and Myanmar as coronavirus measures gradually ease
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.
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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.
