St. Louis Fed’s Uncertainty Index at all-time high

Chart courtesy of Scott R. Baker and the St. Louis Federal Reserve [FRED]

Chart note:  This index (shown monthly) is based on newspaper coverage frequency.  “Our US index,” says the authors, spikes near tight presidential elections, Gulf Wars I and II, the 9/11 attacks, the failure of Lehman Brothers, the2011 debt-ceiling dispute and other major battles over fiscal policy. Using firm-level data, 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 …”