Figure 1: Daily economic policy uncertainty (blue), and centered 7 day moving average (red). Source: PolicyUncertainty, accessed 14 Nov 2016, and author’s calculations.
Today’s value (sure to be revised) exceeds that recorded on 9/18/2001, the previous high in the sample running from 1985 to today.
It seems, the index is based on articles in 10 newspapers:
“USA Today, the Miami Herald, the Chicago Tribune, the Washington Post, the Los Angeles Times, the Boston Globe, the San Francisco Chronicle, the Dallas Morning News, the Houston Chronicle, and the Wall Street Journal.”
How many endorsed Trump?
PeakTrader: I see. You believe if we constructed the index from the two newspapers that endorsed Mr. Trump, the index would be flat?
Menzie Chinn, maybe those journalists became hysterical after Trump won.
And the nominal 10 yr yield jumped another 10 basis points today. The real TIPS rate has almost tripled since election day.
The 10 year yield was 3% about three years ago. The Fed will hike in December, although the higher 10 year yield stabilizing, at 2% or so, and perhaps rising to 2 1/2% by the end of next year, will do much of the Fed’s work. It’s expected expansionary fiscal policy next year will be inflationary. So, the Fed may have to tighten a little faster next year.
“It’s expected expansionary fiscal policy next year will be inflationary. ”
i assume this is ok policy now that a republican is in office?
PeakTrader Yes, the 10 yr was ~3% a few yeas ago. And a in-and-of-itself a higher yield isn’t something I’m overly concerned about. What does concern me is how the yield spiked so sharply and without really knowing Trump’s plans…or the GOP Congress’ plan. Just today we’ve gotten two very different versions of the Trump tax cut & spend plans. I’m also concerned that about 70% of the yield spike was in the real component rather than the inflation expectations component. I suspect we’re looking at Dubya Redux….big tax cuts for the top 1%, big deficits and flat growth for the rest of us.
but we know those bond buyers have a liberal bias!
Hi Menzie,
I notice the VIX decreased during the last week. I don’t understand why.
Menzie, where are you pulling this data from? I see that the Economic Policy Uncertainty Index has hit a level of 292.36 for November 16, 2016. This is lower than the level we saw after Brexit though it is clear that uncertainty remains in an elevated zone for a length period of time. I would add that we’ve also seen a fairly positive financial market response to the Trump win. The CW heading in was that a Trump win would risk a 10-15% correction in stocks. Obviously, this did not happen and the rally has been led by cyclical sectors of the market. Finally, Gallup is reporting a surge in economic confidence after the election results. The GOP voters saw a surge in sentiment while the Democrats came down. Bottomline: I think the notion that this is a 9/11 type event is grossly irresponsible.
Neil: I’ve pulled the data from PolicyUncertainty.com. Depending on the vintage, you’ll get different numbers — which is why I identified the date of access for the series in the legend to the graph.