BULL MARKET FOR POLICY UNCERTAINTY
John Lynch Chief Investment Strategist, LPL Financial | Jeffrey Buchbinder, CFA Equity Strategist, LPL Financial
Last week stocks enjoyed their best week since November 2018 despite rampant policy uncertainty. Policy uncertainty remains high, particularly around trade, but you wouldn’t know it from last week’s stock market rally, which jumped 4.4% on increasing hopes for Federal Reserve (Fed) rate cuts. That jump brought the S&P 500 Index to within 2.5% of its April 30 record high. However, that doesn’t mean stocks are in the clear as the trade conflict with China continues.
POLICY UNCERTAINTY IS HIGH
We know policy uncertainty is high, but researchers have actually quantified it by creating a policy uncertainty index [Figure 1]. The U.S. version of this index, which counts words in news stories associated with economic and Washington, D.C., policy and tracks them over time, is high — no surprise. The trade-policy-specific version of this index is similarly high and trending upward — no surprise there either. Our friends at Strategas Research Partners tell us that searches for “tariffs” on Bloomberg hit their highest level of President Trump’s presidency last week...