Uncertainty on Wall Street is at a record high
One thing is certain on Wall Street: Uncertainty is at a record high.
With Brexit on the brink of failure, a U.S.-China trade deal seemingly nowhere in sight and the U.S. government shutdown approaching its fourth week, a market indicator known as the Global Economic Policy Uncertainty Index this month reached its highest point ever.
The index, created in 1997, is designed to monitor economic uncertainty around global policy developments. It analyzes three main elements: News mentions of terms that suggest economic uncertainty; expiring federal tax code provisions, and disagreement among economic forecasters. Prior to this month, the uncertainty index's record high was in January 2017, the month U.S. President Donald Trump took office. The new, January 2019 record for the index is 337.
"The standard measure of policy uncertainty is flashing red ... and it is difficult for investors and central banks to navigate in this environment," said Torsten Slok, chief international economist at Deutsche Bank, in a note. "Expect more dovishness from global central banks as long as uncertainty persists."
The U.S. Federal Reserve has promised it would be sensitive to markets as it considers how quickly to hike interest rates this year, which many investors understand to mean it will raise rates more cautiously than in 2018. Mr. Trump has lately blamed the Fed for the stock market's woes in November and December, calling it the "biggest threat" to his economic agenda.
