In 1980 Danish singer-songwriter C.V. Jørgensen released one of my very favourite songs with a title that translates into “the season is over”. The lyrics go “summer is over, it just flew by” and I find myself humming these lines to myself every single year when my holiday is over and it’s time to go back to work.

While time flew by for myself and my family holidaying at the French Riviera, one major event after another took place on the world stage. Vladimir Putin decided to cut gas supplies to Europe even further, driving prices sharply higher again; the ECB surprised the markets with its early exit from negative interest rates and the already strained relationship between China and the US deteriorated to a new low when US House Speaker Nancy Pelosi visited Taiwan. As expected, China swiftly retaliated by launching a large-scale military drill in the South China Sea and targeting political sanctions at both Taiwan and the US, including a suspension of the bilateral talks with the US on military issues and climate change.

None of the above events is good news for the macroeconomic outlook, which has already worsened significantly since Russia invaded Ukraine in February. That is why analysts both in Denmark and internationally are likely to downgrade their growth forecasts several times over the late summer.

Particularly for the Euro area where economic indicators quite unequivocally point to a sharp downturn. How bad it will be and whether the economy will slide into an actual recession depends not least on the trend in energy prices. As things stand, especially gas and electricity prices look set to remain high – just how high is mainly determined by the winter temperatures and Putin’s next moves. It wasn’t without good reason that the EU Commission at end-July presented a plan to cut gas consumption already now, which got fast-track approval by the Council on 5 August. Nor does it help the situation that the extremely hot weather in Europe this summer has led to a temporary shutdown of the reactors at two nuclear plants in France because the cooling water from the rivers has become too warm. Europe is currently on the brink of an actual energy crisis.

But the summer also brought good news. Not least from the commodity markets where prices have declined across the board lately. This also goes for agricultural products. Grain prices have fallen sharply as a result of Russia and Ukraine signing a deal with the UN and Turkey to resume exports of wheat from both countries through the Black Sea. This fuels hopes that a global food crisis can be averted in time and that the surging food prices that we have seen in supermarkets since the spring will soon be a thing of the past. In fact, food prices in commodity markets have fallen by nearly 15% since peaking in mid-May!

The financial markets also saw significant volatility over the summer when the rate increases of the spring turned into new declines, staging a major comeback for stock markets. One of the reasons why long yields have declined is the aggressive monetary policy tightening, which has led to lower long-term inflation expectations. Another reason is the weak economic indicators, which have reinforced fears of an imminent economic downturn, which in itself will curb inflation. And, all else equal, when interest rates decline it becomes more attractive for investors to place their money in the stock market. This has produced handsome returns for investors over the summer.

However, the question is whether this trend will remain intact – as all else is of course not always equal. Earnings expectations for listed companies also pay a decisive role, for instance. And they may well come under pressure. Not least if the geopolitical tensions – which are currently more strained than they have been in decades – escalate further. If so, that could push the global economy into a very serious situation. Also, the pandemic and the risk of new lockdowns loom in the background. And there is still a risk that the cocktail of high inflation and monetary policy tightening could dilute purchasing power so much that the economy ends up in a recession.

So we do indeed have an exciting autumn ahead of us. The season is far from over; it has barely just begun.