What will happen next with the global economy and how governments will respond is troubling Wall Street as investors and economists chase a moving target of trade wars and monetary policy shifts.
An index designed to measure policy-related uncertainty around the world is hovering at its highest level ever. The Economic Policy Uncertainty Index hit its second-highest level, 340, in June. It spiked to 341 at the end of last year when the market suffered its worst December since the Great Depression amid the intensified U.S.-China trade war and an ill-advised rate increase from the Federal Reserve, with the major stock averages briefly dipping into bear market territory.
“We found that high levels of policy uncertainty tended to depress investment, depress hiring, in industries that are most exposed to that government behavior,” one of the index’s founders Scott Baker told CNBC.
