The most common question among investors these days is when to buy the dip. Very few market participants seem to be worried about a crisis or deep recession, let alone a nuclear threat.

However, those three scenarios are not unimaginable. In its Global Data Watch of June 17, JP Morgan says that its internal model only shows a 25% chance of recession in the next year. Furthermore, they clarify that the likelihood would rise to 40% if credit conditions were updated.

Still low, right? We must remember that in January 2008 Reuters reported that “expectations for the weakest consumer spending performance in 17 years during 2008 kept the odds of a recession at nearly 40 percent”.

For years we have read that it was important for the Federal Reserve and the major central banks to push the limits of monetary policy to boost growth and jobs. Monetary policy stood at the forefront of all recovery plans. In 2008, quantitative easing seemed enormous, but the subsequent incremental plans have made that stimulus package virtually irrelevant.

Since 2008 each new government spending plan had to be larger. If it was not at least a couple of trillion dollars, it did not even make the headlines. As for monetary policy, limits were surpassed almost every five years. Negative real and even nominal rates, trillions of new money supply, and different purchase programs that included private debt and even, in the case of Japan, exchange traded funds (ETFs).

Many have read that there is a food crisis looming and there are significant concerns about grain shortages. The main reason for this possible crisis is the Ukraine invasion. However, this is not the full picture.

Many countries around the world have a large deficit of cereal production, which is essential to feed livestock. The main culprit is rising government intervention that has made costs soar even in periods of low energy prices, and an unsustainable level of restrictions that have made it impossible for farmers to continue planting and producing grain.

In 2020, Ukraine produced 4% of the world’s wheat production, and Russia 10%. Together, they produce almost as much wheat as the entire EU, but the reason is that the EU has made it impossible to produce wheat in an economical way.

The United States consumption figure seems robust. An 0.9% rise in personal spending in April looks good on paper, especially considering the challenges that the economy faces. This apparently strong figure is supporting an average consensus estimate for the second quarter Gross Domestic Product (GDP) of 3% according to Blue Chip Financial Forecasts.

However, the Atlanta Fed GDP nowcast for the second quarter stands at a very low 1.9%. If this is confirmed, the United States economy may have delivered no growth in the first half of 2022 after the decline in the first quarter, narrowly avoiding a technical recession.