Given all the problems thrown at the global economy lately, from a pandemic to the Russia-Ukraine crisis and resurgent inflation, perhaps the biggest shock is that it hasn’t crashed into recession already. There’s still time.
All the warning indicators are flashing red and we could be heading there sooner than people realise.
It won’t be any flash-in-the-pan recession, either, but could prove nasty, brutish and long, says Ernst Knacke, head of research at wealth and asset manager Shard Capital.
“Our fear is the economic downturn in Europe could be on par with the Great Depression of the 1930s,” Mr Knacke says.
That was preceded by the “roaring 20s”, when artificially cheap credit and loose monetary policy from the US Federal Reserve created an unsustainable boom and then the inevitable bust.
The Fed has been repeating that policy mistake since the financial crisis in 2008, doubling down during the pandemic, and now we'll pay the price.
Supply shocks, the US-China trade tensions, surging food and energy costs, rocketing prices and stretched consumers are creating “demand destruction on steroids”, Mr Knacke says.
At the same time, Fed chairman Jerome Powell has belatedly decided that the era of easy monetary policy is behind us and is tightening as growth weakens. This will only add fuel to the fire.
“Add the risk of the Third World War and we believe it’s become impossible to achieve a so-called soft landing,” Mr Knacke says.
Europe is particularly vulnerable. The continent is facing its biggest conflict since 1945, while Germany is coming under increased pressure to sanction Russian oil and gas imports, a move its politicians fear could cut gross domestic product by 6 per cent.
The weakening euro and sterling will further stoke rising prices by driving up import costs and the depression could “last not months, but years”, Mr Knacke says.
Too many are in denial. “If you are not seeing the flashing red lights, it’s time to wake up,” he adds.
Mr Knacke isn’t alone in his fears. This month, the Bank of America’s chief investment strategist, Michael Hartnett, wrote in a client note that inflation shock is worsening, the interest rate shock is only beginning and a “recession shock” is coming.
In that scenario, stocks and bonds will struggle, while cash, commodities and cryptocurrency could outperform, he said.
Goldman Sachs predicts a 35 per cent chance of a recession in the next two years.
A classic recession warning sign is also blinking. It’s a technical one, but history suggests that it is reliable.
The yield curve plots the interest rates of government bonds with different duration, say, from two to 30 years. Typically, long-term bonds offer higher yields but when recessions loom, this goes into reverse as investors fear trouble down the track.
It’s called an inverted yield curve and “we had one in March”, Kareem Rathore, partner and financial adviser at Hoxton Capital Management, says.
“In the last 26 times the curve has inverted, it ended in recession 22 times.”
With the Fed expected to increase lending rates by 0.5 per cent in May and again in June, Mr Rathore says a recession is “fairly likely”, but that they are notoriously hard to predict.
“If the Ukraine crisis gets worse, or supply chain issues sort themselves out, central banks could turn less hawkish. Even if interest rates do increase, borrowing money is still cheap by historical standards,” he says.
Mr Rathore lists other positives: “Corporate earnings are still growing, consumers have a large savings margin, unemployment is low and wages are increasing.”
However, if recession does strike, it could be brutal for stock markets and he predicts a drop of between 30 per cent and 50 per cent from today’s highs.
While frightening, that could be a buying opportunity for the brave.
“Markets will most likely recover fairly swiftly as they did after the Covid-19 recession. It could be a good time to buy, with stocks undervalued by the panic selling. It’s almost like a sale on stocks,” Mr Rathore says.
Central bankers must raise interest rates and tighten their monetary policies regardless of the recession risk as inflation is now raging out of control, he adds.
“In the US, it is currently 8.5 per cent with no sign of slowing down. This is eroding the purchasing power of consumers’ income, savings and investments. Central banks have no choice,” Mr Rathore says.
G7 business activity is surprisingly strong and that gives grounds for optimism, John Knobel, market strategist for online broker Skilling, says.
“Any signal of a recession will show up in the earnings reports of the big cap companies and, so far, the earnings season looks solid,” he adds.
The US can cope with higher interest rates, so there is no need to panic, Mr Knobel says. “Stock market volatility has increased, but shares should continue to provide investors with good returns over the short, medium and long term.”
History shows that stock markets can protect your wealth by outpacing inflation, Mr Knobel says.
“Look for good companies with a low price/earnings [P/E] ratio, low debt and steady cash flows for your core portfolio.”
There is always something to worry about and investors need to look beyond short-term fears, says Aziz Alnaim, lead portfolio manager at the Mayar Responsible Global Equity Fund.
Second-guessing the future is impossible as nobody can say for sure whether we are heading for a recession or how markets will respond.
Remember, they actually surged after the pandemic. Similarly, we have no idea how the Ukraine war will turn out, Mr Alnaim says.
“Putin could announce ‘mission accomplished’, global energy prices could fall in response and inflation would follow. Alternatively, the conflict may deepen,” he adds.
Investors should stay calm and focus on companies that have experience in navigating difficult macroeconomic conditions, with strong competitive advantages to maintain their market position, Mr Alnaim says.
“Since 2008, we have been through pandemics, trade wars, natural disasters and a global financial crisis,” he says.
“Yet, if you had invested in the MSCI World 15 years ago and closed your eyes, on opening them today you would find your investment trebled.”
Recessions come in different shapes and forms, David Morrison, senior market analyst at Trade Nation, says.
“We had a short and sharp recession in early 2020 due to the pandemic, while the recession after the financial crisis was drawn out. In both cases, central banks and governments helped stave off the worst effects with huge dollops of monetary and fiscal stimulus.”
They may struggle to do that again, at least while inflation is high, but recessions come round quite regularly, so don’t be too downbeat.
“We’ve also suffered them in the early 1990s, 1980s and mid-1970s, and survived,” he says.
Mr Morrison isn’t worried by the bond yield curve.
“The inversion must be deep and last for a significant period. The recent one lasted a few days.”
He remains upbeat as unemployment is low and earnings are high, but cautions that central banks are treading a fine line and liable to make mistakes.
A recession cannot be ruled out, but history shows you should stay invested and hold on for the recovery. Keeping a balanced portfolio with a blend of shares, bonds, cash, gold, commodities and cryptocurrency will help you weather the worst.
If the downturn is serious and job losses rise, you may have bigger worries than how your portfolio is performing, Mr Morrison says.
“Maybe it’s a good time to learn a new skill.”
________________________
Rising fuel prices to push up flight costs — in pictures
What is the Supreme Petroleum Council?
The Abu Dhabi Supreme Petroleum Council was established in 1988 and is the highest governing body in Abu Dhabi’s oil and gas industry. The council formulates, oversees and executes the emirate’s petroleum-related policies. It also approves the allocation of capital spending across state-owned Adnoc’s upstream, downstream and midstream operations and functions as the company’s board of directors. The SPC’s mandate is also required for auctioning oil and gas concessions in Abu Dhabi and for awarding blocks to international oil companies. The council is chaired by Sheikh Khalifa, the President and Ruler of Abu Dhabi while Sheikh Mohamed bin Zayed, Abu Dhabi’s Crown Prince and Deputy Supreme Commander of the Armed Forces, is the vice chairman.
The specs
- Engine: 3.9-litre twin-turbo V8
- Power: 640hp
- Torque: 760nm
- On sale: 2026
- Price: Not announced yet
Killing of Qassem Suleimani
Specs
Engine: 51.5kW electric motor
Range: 400km
Power: 134bhp
Torque: 175Nm
Price: From Dh98,800
Available: Now
Jetour T1 specs
Engine: 2-litre turbocharged
Power: 254hp
Torque: 390Nm
Price: From Dh126,000
Available: Now
The Travel Diaries of Albert Einstein The Far East, Palestine, and Spain, 1922 – 1923
Editor Ze’ev Rosenkranz
Princeton
The specs
Engine: 4.0-litre V8 twin-turbocharged and three electric motors
Power: Combined output 920hp
Torque: 730Nm at 4,000-7,000rpm
Transmission: 8-speed dual-clutch automatic
Fuel consumption: 11.2L/100km
On sale: Now, deliveries expected later in 2025
Price: expected to start at Dh1,432,000
EPL's youngest
- Ethan Nwaneri (Arsenal)
15 years, 181 days old
- Max Dowman (Arsenal)
15 years, 235 days old
- Jeremy Monga (Leicester)
15 years, 271 days old
- Harvey Elliott (Fulham)
16 years, 30 days old
- Matthew Briggs (Fulham)
16 years, 68 days old
What is a Ponzi scheme?
A fraudulent investment operation where the scammer provides fake reports and generates returns for old investors through money paid by new investors, rather than through ligitimate business activities.
UAE currency: the story behind the money in your pockets
UAE currency: the story behind the money in your pockets
Milestones on the road to union
1970
October 26: Bahrain withdraws from a proposal to create a federation of nine with the seven Trucial States and Qatar.
December: Ahmed Al Suwaidi visits New York to discuss potential UN membership.
1971
March 1: Alex Douglas Hume, Conservative foreign secretary confirms that Britain will leave the Gulf and “strongly supports” the creation of a Union of Arab Emirates.
July 12: Historic meeting at which Sheikh Zayed and Sheikh Rashid make a binding agreement to create what will become the UAE.
July 18: It is announced that the UAE will be formed from six emirates, with a proposed constitution signed. RAK is not yet part of the agreement.
August 6: The fifth anniversary of Sheikh Zayed becoming Ruler of Abu Dhabi, with official celebrations deferred until later in the year.
August 15: Bahrain becomes independent.
September 3: Qatar becomes independent.
November 23-25: Meeting with Sheikh Zayed and Sheikh Rashid and senior British officials to fix December 2 as date of creation of the UAE.
November 29: At 5.30pm Iranian forces seize the Greater and Lesser Tunbs by force.
November 30: Despite a power sharing agreement, Tehran takes full control of Abu Musa.
November 31: UK officials visit all six participating Emirates to formally end the Trucial States treaties
December 2: 11am, Dubai. New Supreme Council formally elects Sheikh Zayed as President. Treaty of Friendship signed with the UK. 11.30am. Flag raising ceremony at Union House and Al Manhal Palace in Abu Dhabi witnessed by Sheikh Khalifa, then Crown Prince of Abu Dhabi.
December 6: Arab League formally admits the UAE. The first British Ambassador presents his credentials to Sheikh Zayed.
December 9: UAE joins the United Nations.
How to improve Arabic reading in early years
One 45-minute class per week in Standard Arabic is not sufficient
The goal should be for grade 1 and 2 students to become fluent readers
Subjects like technology, social studies, science can be taught in later grades
Grade 1 curricula should include oral instruction in Standard Arabic
First graders must regularly practice individual letters and combinations
Time should be slotted in class to read longer passages in early grades
Improve the appearance of textbooks
Revision of curriculum should be undertaken as per research findings
Conjugations of most common verb forms should be taught
Systematic learning of Standard Arabic grammar
From Zero
Artist: Linkin Park
Label: Warner Records
Number of tracks: 11
Rating: 4/5
UPI facts
More than 2.2 million Indian tourists arrived in UAE in 2023
More than 3.5 million Indians reside in UAE
Indian tourists can make purchases in UAE using rupee accounts in India through QR-code-based UPI real-time payment systems
Indian residents in UAE can use their non-resident NRO and NRE accounts held in Indian banks linked to a UAE mobile number for UPI transactions
Drishyam 2
Directed by: Jeethu Joseph
Starring: Mohanlal, Meena, Ansiba, Murali Gopy
Rating: 4 stars
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Bharatanatyam
A ancient classical dance from the southern Indian state of Tamil Nadu. Intricate footwork and expressions are used to denote spiritual stories and ideas.
THE BIO
Born: Mukalla, Yemen, 1979
Education: UAE University, Al Ain
Family: Married with two daughters: Asayel, 7, and Sara, 6
Favourite piece of music: Horse Dance by Naseer Shamma
Favourite book: Science and geology
Favourite place to travel to: Washington DC
Best advice you’ve ever been given: If you have a dream, you have to believe it, then you will see it.
Mia Man’s tips for fermentation
- Start with a simple recipe such as yogurt or sauerkraut
- Keep your hands and kitchen tools clean. Sanitize knives, cutting boards, tongs and storage jars with boiling water before you start.
- Mold is bad: the colour pink is a sign of mold. If yogurt turns pink as it ferments, you need to discard it and start again. For kraut, if you remove the top leaves and see any sign of mold, you should discard the batch.
- Always use clean, closed, airtight lids and containers such as mason jars when fermenting yogurt and kraut. Keep the lid closed to prevent insects and contaminants from getting in.
Killing of Qassem Suleimani
Specs
Engine: Dual-motor all-wheel-drive electric
Range: Up to 610km
Power: 905hp
Torque: 985Nm
Price: From Dh439,000
Available: Now
Panipat
Director Ashutosh Gowariker
Produced Ashutosh Gowariker, Rohit Shelatkar, Reliance Entertainment
Cast Arjun Kapoor, Sanjay Dutt, Kriti Sanon, Mohnish Behl, Padmini Kolhapure, Zeenat Aman
Rating 3 /5 stars
FA CUP FINAL
Manchester City 6
(D Silva 26', Sterling 38', 81', 87', De Bruyne 61', Jesus 68')
Watford 0
Man of the match: Bernardo Silva (Manchester City)
Why are asylum seekers being housed in hotels?
The number of asylum applications in the UK has reached a new record high, driven by those illegally entering the country in small boats crossing the English Channel.
A total of 111,084 people applied for asylum in the UK in the year to June 2025, the highest number for any 12-month period since current records began in 2001.
Asylum seekers and their families can be housed in temporary accommodation while their claim is assessed.
The Home Office provides the accommodation, meaning asylum seekers cannot choose where they live.
When there is not enough housing, the Home Office can move people to hotels or large sites like former military bases.
UAE currency: the story behind the money in your pockets
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Quick pearls of wisdom
Focus on gratitude: And do so deeply, he says. “Think of one to three things a day that you’re grateful for. It needs to be specific, too, don’t just say ‘air.’ Really think about it. If you’re grateful for, say, what your parents have done for you, that will motivate you to do more for the world.”
Know how to fight: Shetty married his wife, Radhi, three years ago (he met her in a meditation class before he went off and became a monk). He says they’ve had to learn to respect each other’s “fighting styles” – he’s a talk it-out-immediately person, while she needs space to think. “When you’re having an argument, remember, it’s not you against each other. It’s both of you against the problem. When you win, they lose. If you’re on a team you have to win together.”
Match info
Wolves 0
Arsenal 2 (Saka 43', Lacazette 85')
Man of the match: Shkodran Mustafi (Arsenal)
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The biog
Name: Dhabia Khalifa AlQubaisi
Age: 23
How she spends spare time: Playing with cats at the clinic and feeding them
Inspiration: My father. He’s a hard working man who has been through a lot to provide us with everything we need
Favourite book: Attitude, emotions and the psychology of cats by Dr Nicholes Dodman
Favourit film: 101 Dalmatians - it remind me of my childhood and began my love of dogs
Word of advice: By being patient, good things will come and by staying positive you’ll have the will to continue to love what you're doing
UAE currency: the story behind the money in your pockets
The Library: A Catalogue of Wonders
Stuart Kells, Counterpoint Press
