How Trade Uncertainty Is Crushing Economic Optimism

Or, Trumpian Winning, edition 3,010,524. From Torsten Sløk/Deutsche Bank today:

And here is the Baker, Bloom and Davis categorical policy uncertainty index for the US, plotted against the 5yr-3mo Treasury spread highlighted by Campbell Harvey. The EPU-trade index jumps as the spread accelerates its decline.

Figure 1: Trade policy uncertainty categorical index (blue, left scale) and 5yr-3mo Treasury spread, % (red, right scale). Source: and Fed via FRED. 

For more on the likelihood of recession, see here.


8 thoughts on “How Trade Uncertainty Is Crushing Economic Optimism

  1. Effem

    Cherry-picking. I can easily point out something to the contrary: check the NFIB Optimism survey from this Tuesday for example.

    1. Menzie Chinn Post author

      Effem: When has the NFIB optimism index predicted a recession? I haven’t seen a probit regression run on this, although I did eyeball this the other day and conclude it wasn’t a promising regression. I invite you to do it (on the other hand, I *have* run probits on 10yr-3mo, 5yr-3mo, BBB-Treasury spreads, Baker/Bloom/Davis EPU, term premium adjusted 10yr-3mo, etc., and know something more than merely “cherry picking”.

  2. Moses Herzog

    I guess Republican Senator and ignoramus extraordinaire James Lankford has been reading “Princeton”Kopits middle school essays over on the Alex Jones webcast:
    “Now the word is out on the street in Central America — that if you claim to be a minor, 17 years old or younger, you rapidly get into the United States,” U.S. Sen. James Lankford said.
    The Republican senator said many of the children coming across the U.S. border might not be children at all.
    “The vast majority of males that cross the border, right now, all claim to be 17 years old and don’t have any documentation,” Lankford said. “We don’t really know if they’re 25 years old or if they’re 17 years old.”

    Like albino James Lankford, in his little cocoon/bubble in Washington D.C. is now the “expert” on what is being discussed “on the ‘satanic’ streets of Central America”. Oh no!!! Now every man crossing the border is claiming to be 17!!! The omnipresent “infestation” of brown skinned males claiming to be seventeen year olds soon will destroy America!!!

    Of course, the local Okie station got their most ignorant porker, redneck Abigail Ogle, to repeat verbatim this lie, like she’s just heard the news from Jesus:

    1. Moses Herzog

      @ Menzie, 2slugbaits, or anyone knowledgeable
      I would LOVE to see the ICE or U.S. Border Patrol’s own figures on that. Or whichever agency keeps those records and documents immigrants’ age claims, because my educated guess is (more educated than Lankford’s anyway) even if you were to only include male immigrants crossing the southern border, that the percentage of males claiming to be 17 is very far short of being “a majority”. I know Republican james Lankford is not above telling the worst of LIES to his Oklahoma constituents, who Lankford apparently believes to be composed mostly of voters with down syndrome level IQ.

  3. Bob Flood

    Please do not censor perfectly good dependent variables just for you can use the probit button in STATA. Don’t throw away data.
    You can run (say) simple OLS regressions on the predictive variables then draw from actual ‘bins’ of residuals to see the probability of dependent variables vs any
    desired ‘limit.’ This drives me nuts.

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