Kevin L. Kliesen, an economist at the St. Louis Federal Reserve, highlighted the unprecedented increase in uncertainty from last spring to this spring, which is the sharpest in nearly 40 years. This heightened uncertainty makes it difficult for companies and consumers to make decisions, potentially leading to delays in investments and cutbacks in spending. This instability could also be a precursor to recessions.
Menzie Chinn, a professor at the University of Wisconsin, emphasized the extreme confusion people are facing due to this uncertainty. He gave the example of potential homebuyers who may be hesitant to make a purchase due to worries about a potential drop in home prices in the future.
The uncertainty is also reflected in the bond market, where government bonds are being sold more than bought despite stocks performing poorly. This goes against historical trends, as bonds are typically seen as a safe investment during times of market volatility. However, with 10-year Treasury yields rising above 4.5%, investors seem to be shying away from bonds.
Overall, the sharp increase in uncertainty is impacting decision-making both in the business world and among consumers. It is causing hesitancy in investments and spending, and the unpredictability in the market is creating challenges for investors looking for safe havens like government bonds.
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