Chart: Surge in Economic Policy Uncertainty Index 4 Times any Prior

Economic uncertainty has increased significantly, driven by erratic political developments and a wave of historically high, rapidly shifting tariffs. Some may view this as the calculated strategy of a genius playing chess – I’ll refrain from weighing in on that. Regardless of how one interprets the political decisions being made (and un-made, then made again), the outcome is clear: economic uncertainty has intensified.

This is illustrated starkly in the chart above displaying the Fed’s Economic Policy Uncertainty Index for all periods available in their Fred data portal. The current surge in the uncertainty index has reached 7,983 – more than four times the previous high of 1,946.69, which also occurred during a Trump administration. Compared to periods when Trump was not in office, the current level is nearly eight times higher than the prior non-Trump peak of 1,020.58.

Hopefully, this uncertainty will diminish over time, either as policies stabilize or as businesses and consumers adjust to a new normal. While markets are often resilient, persistently high uncertainty tends to slow economic activity. It causes businesses to delay investments, hiring, and expansion, and consumers to hold off on major purchases. When decision-making is clouded by unpredictability, capital sits idle, risk tolerance shrinks, and economic momentum stalls. In short, sustained uncertainty is a drag on growth, and clarity – whether positive or negative – is often better than confusion.

Let’s hope this era of turbulence gives way to something a little more boring – economically speaking, that’s usually a good thing.

Chart: Baker, Scott R., Bloom, Nick and Davis, Stephen J., Economic Policy Uncertainty Index: Categorical Index: Trade policy [EPUTRADE], retrieved from FRED, Federal Reserve Bank of St. Louis; https://fred.stlouisfed.org/series/EPUTRADE.