I don't know how big a deal this is, but in the aftermath of the Trump election economic uncertainty has reached its highest level since the index began 40 years ago:
There have actually been a few single-day spikes higher than the current level, but the difference is that today's reading is the result of a steady rise since Election Day:
This is a volatile index. By Thanksgiving it might be back to normal. Then again, it might not be.
And it could matter. Here are the findings from the paper that originated the index:
We find that policy uncertainty raises stock price volatility and reduces investment and employment in policy-sensitive sectors like defense, healthcare, and infrastructure construction. At the macro level, policy uncertainty innovations foreshadow declines in investment, output, and employment in the United States.
You have been warned.
Everything is volatile right now, the animal spirits that were so jubilant at the idea of tax cuts and reduction in regulations via "efficiency" are running the numbers and realizing just how bad the results could be. Especially if people continue to pull back on spending on big ticket items like homes.
Stability drives comfort in taking on large expenses and Trump is not promising stability. Smart money is going into protective mode, especially with the clown car cabinet being proposed, setting up a fight between the Senate and Trump. People who like stability aren't comfortable with the idea of burning it all down.
Elect clowns, expect a circus.
In case it isn't obvious, this may as well be a KPI for the regime.
They want everyone fearful and reactive. They're starting with Republicans, the military, and media.
Republicans will fall in line, naturally. Brave Sir Bezos pre-complied, of course. The Mika & Dufus Show bent the knee this week, too. (They're entertainment, but people mistake them for commentary.)
(No commentary from me about how the military will react, I know very little about that world, I see it as a seriously disturbing wild card.)
I'm sure this was all rigorously analyzed statistically, but OF COURSE "uncertainty ... reduces investment and employment" and "foreshadow[s] declines in investment, output, and employment," for the same reason long-term interest rates are usually higher than short-term ones: you're more uncertain about what's going to happen so you're less willing to put money on the line.
And that's just the UNCERTAINTY part. THEN there's all the talk about herding a BIG (exploited and underpaid) chunk of the labor market into "camps" and thereby out of the labor force. If that happens, who's gonna work in construction, or agriculture, or meatpacking, or home care, or hospitality, or or or? Waddaya think's gonna happen to output in those industries, and to the other industries dependent on them (not to mention the price of, ahem, eggs and bacon), and the demand for them, and the downstream effects on industries dependent on them, and so on? And if a bunch of cockamamie "tariffs" are put in place, what's gonna happen to the markets for those goods, and the downstream industries, and so on?
Who's gonna invest in ANYTHING with a bunch of nutcase ideas like that floating around and nobody with any influence to point out how dumb they are?
Of course the MAGAts will blame something else -- Chinese thermostats or Trans kids in sports -- and the Good
GermansRepublicans will hem and haw and change the subject to Bitcoin or something, but that ain't gonna stop the boat from settling a lot lower in the water ...What do you call it when voters act irrationally and the markets react rationally?
"Always keep 'em guessing" is a mantra for folks who look to maximize their personal power.
It turns out, though, that it isn't good for the people around that guy. Stability and predictability are boring, but also valuable.
So now we have three indicators: Economic uncertainty is up, stock market is inflated https://jabberwocking.com/raw-data-the-stock-market-is-very-frothy/, and the yield curve has un-inverted https://jabberwocking.com/the-yield-curve-has-just-un-inverted/
If I were a person who tried to time the market (which I'm not) I might be heading for safer harbors about now
People timing the market are going to hold out to the bitter end in order to not leave any money on the table.
I think the smarter people are taking their profits from this bull market and safe harboring right now, even if the final top is yet to be in.
What are those "safe harbor" investment instruments? Cash, bonds, etc? I'm 5 years from retirement and did very well under Biden but cannot afford another 30% correction or downturn over the next 2-3 years
Yes, "safe harbor" refers to instruments with a value on the label. Things that say, "In X years, you will get Y dollars". Most bonds fit this description. Cash does, too. There are a few other things.
Thanks. I have some work to do
Retirement doesn't mean you cash in all your savings immediately. You're going to draw them down gradually over, hopefully, a couple of decades. Social Security and a pension (if you have one) can support all or most of your day-to-day expenses. Unless you're in your 80's, you don't have a 2-3 year horizon...it's much longer. Still, taking a 30% hit is always a bad thing. Given that stocks are expensive and bonds are cheap, it might be a good time to rebalance to a more conservative portfolio.
My nightmare scenaro is getting purged from my job and having to make my nest egg last and last in a market downturn. I'm hoping keeping my head down and quietly working will allow me at least 4-5 more years so I have a better chance of not outliving my money.
I think bonds would be the classic play here. In a recession interest will go down, driving up the price of bonds. Isn't that right?
Maybe a bond fund though, so you're diversified. I had relatives who got hammered in 2008 because they invested a ton in some extremely safe individual corporate bonds: Fannie Mae and Bear Stearns!! yikes that was bad.
Trump's first cabinet had some colorably qualified individuals like Tillerson, Mnuchin, and Mattis in key posts, most of whom he of course fired at some point. This time around it's simply going to be a full-on clown car of trolls and miscreants nd the business of government will be either stroking Trump's ego, corrupt profiteering, or going after his perceived enemies. That is, shall we say, not going to be good for business or the economy, so I can see why folks are worried. But 49% of the electorate wanted to just fuck it and blow everything up, so that's evidently what we're going to get.
It will be very interesting to see how the first couple of Trump picks fare in the Senate. I think that if they e.g. reject Gaetz, they will quickly get into the habit of defying Trump, whereas if they let the first couple of grossly unqualified nominees pass they will establish a pattern of simply rubber stamping Trump's picks.
I would like to see how Trump's picks would do in the Senate too.
But I don't we'll get to see that. I think they're planning to go straight to Plan B: president adjourns Congress and makes recess appointments.
Agreed. Congress is interested in stability and tends to shy away from obvious nutballs that threaten the establishment order. They will try and block the most egregious of Trump's picks, which is clearly already factored into the strategy.
Not everyone is interested in tearing down the government to remake it in a more business friendly manner, especially not those heavily invested in the current regime.
Gov't reality TV at it's finest. Set up the conflict early so the viewers get invested.