One subject that is a major issue – and one that many believe is “holding back the economy” – is that of “uncertainty.” This is a substantial concern to businesses, both large and small, as seen in recent business surveys including the NFIB Small Business Optimism Survey as well as the Deloitte “CFO Signals” Survey.
While this “uncertainty” seems to comprised of many factors, those prominent include government spending and budget issues; regulations; government requirements; and foreign and monetary policy. Needless to say, the topics are wide-ranging and (potentially) complex.
While I don’t believe, as many do, that this “uncertainty” is the key issue that is constraining economic growth, I nonetheless believe it is a critical issue, especially to businesses.
An April 29 op-ed in the Wall Street Journal, “Uncertainty Is the Enemy of Recovery,” by Bill McNabb, focuses on the topic.
A couple of notable excerpts include:
Quite simply, if firms can’t see a clear road to economic recovery ahead, they’re not going to hire and they’re not going to spend. It’s what economists call a “deadweight loss”—loss caused by inefficiency.
Three economists, Stanford University’s Nicholas Bloom and Scott Baker and the University of Chicago’s Steven Davis, have done invaluable work measuring the level of policy uncertainty over the past few decades. Their research (available at policyuncertainty.com) shows that, on average, U.S. economic policy uncertainty has been 50% higher in the past two years than it has been since 1985.
The Special Note summarizes my overall thoughts about our economic situation
SPX at 1648.03 as this post is written