Rarely has spring taken so long to arrive. It’s been far too grey, wet and cold. Spring has been with us since Ascension Day, bringing some really summery weather.

The recession in the industrial nations seems to be taking just as long to arrive as the warm weather. Month by month, firstly the leading economic indicators and then the hard economic figures have been getting worse. Yet we’ve seen labour shortages and positive growth.

Weak consumer sentiment remains a cause for concern. The statistics gathered in April are, with the exception of the COVID-19 pandemic, still at levels last seen almost 30 years ago. Even during the financial crisis, people in Switzerland were more optimistic about their economic prospects than they are today. This pessimism has also spread to industrial companies, which now expect a recession. Only the services sector remains moderately optimistic.

But as well as sentiment, real economic data has also gone from bad to worse over recent months. Retail sector figures have been disappointing since the Christmas shopping period. Goods imports are also weak, pointing to a sharp slowdown in the domestic economy. Value creation in the construction industry and among financial service providers has actually been falling for several quarters.

But unemployment remains low and companies are complaining about labour shortages. That’s not just due to the state and healthcare sector attracting more employees over the past three years, and more and more people working part-time. The robust labour market is mainly due to the fact that interest rates are still below the rate of inflation and, in turn, below the long-term average.

Not just in Switzerland, but in Europe, the UK, the USA and Japan, real interest rates are still well into negative territory, despite being raised sharply in some cases. That means it’s not worth leaving money lying in a bank account, as even with the interest earned, the purchasing power of savings is ultimately being eroded by inflation. The start of the recession is being delayed by growth factors triggered by ongoing negative real interest rates. But whether they can completely stave off a global recession seems unlikely in our view. A similar picture is emerging in practically all industrial nations: weak sentiment, a robust labour market and, overall, weak, but still positive growth so far.

This picture contrasts with the situation in the major emerging markets, where we can see far stronger growth signals. India and Indonesia are performing well, while China is recovering from the coronavirus-induced slump in winter, albeit tentatively. But that means the economic outlook is positive for almost half of the world’s population. Many emerging markets are benefiting from the dollar’s downward trend. For us, that’s reason enough to recommend bulking up emerging market equities this month, after increasing the allocation of emerging market bonds in April. But generally, we remain cautious about equities, and are retaining an underweighted position.