Uncertainty Reigns

The term “uncertainty” dominated economic reporting last year. It was repeatedly heard on radio and television or seen in newspapers and social media. Figure 1 plots an index of uncertainty from the website Economic Policy Index. There is always an underlying level of uncertainty as the future can never be perfectly known. However, as Figure 1 shows, last year saw the index spike considerably higher, reaching levels not seen before. Not even during the pandemic or the Great Depression did the index register as high as last year.

The index remains historically high entering 2026. Analysts believe 2026 will see less uncertainty and more stability. It will be the second year of President Trump’s term when presidential influence typically wanes. However, the actions in Venezuela might indicate otherwise. 2026 is also an election year, and elected officials typically want to avoid controversy and instability in an election year. Businesses and consumers struggle with uncertainty and tend to delay investments and spending not knowing what might come next. Thus far, the economy has been able to shrug off the uncertainty. The question for 2026 is whether it can continue.

Figure 1. Monthly U.S. Economic Policy Uncertainty Index