The escalation of tension in Ukraine has reminded us of something many investors seemed to have forgotten: Geopolitical risk. Sanctions and the inevitable drop in trade have proven to generate a significant negative impact on the different economies involved. We know from the 2014 Ukraine crisis that the economic hit is severe and persistent.

The unemployment rate in the Euro Area fell to 7% in December and 6.4% in the European Union, compared with the United States at 3.9%. We cannot forget that these unemployment rates do not include furloughed jobs covered by unemployment retention schemes, which account for another 5 million workers waiting to return to normal activity.

After a fiscal stimulus plan of more than 5% of GDP in 2020 and another 4% in 2021 and the European Central Bank purchasing 100% of net issuances from most sovereigns, the recovery shows a concerning weakness. Furlough jobs are rising again, working hours are still below the pre-pandemic level and real wages are falling as inflation eats the recovery.

I was surprised to see a tweet from President Biden showing the GDP (Gross Domestic Product) of the United States for 2021 compared to the average GDP growth under other presidents. The Tweet stated “This didn’t happen by accident. Because of the actions we took, last year we achieved the fastest economic growth in nearly four decades.”

The history of economic development cannot be understood without the importance of recession periods. Recessions are often the result of the excess accumulated in previous years. Creative destruction after a period of excess used to drive a stronger recovery and continued economic development. That was until risky assets became the biggest concern for policymakers.