Investor uncertainty

In 2025, investor uncertainty has increased significantly, with the VIX projected to rise by 5.7% and the uncertainty index estimated at 21.1%. This shift from the easing trend in 2024 is primarily due to renewed concerns over US tariff implementation under a new administration. After a period of stability from interest rate pauses and cuts, anticipated restrictive trade policies have prompted greater risk aversion and heightened market volatility.

From 2020 to 2025, investor uncertainty exhibited high volatility, influenced by health, geopolitical events, and shifts in monetary policy. The volatility index returned near historical norms in 2021 after the pandemic shock, but uncertainty remained due to ongoing COVID-19 threats, renewed lockdowns in China, and supply chain disruptions. The US Federal Reserve's significant interest rate hikes in 2022, in response to rising inflation, spiked market uncertainty and triggered stock selloffs. The Russian invasion of Ukraine amplified global uncertainty, while escalating inflation rates impacted investor sentiment worldwide. By 2023, anticipation of a Federal Reserve pause in rate hikes reduced uncertainty, fostering optimism that avoided a severe downturn. The trend continued into 2024 with rate reductions, though the global economic environment remained sensitive to conflicts and policy changes.

During this period, macroeconomic factors such as fluctuating monetary policy, significant geopolitical events, and global health crises were central to shaping investor uncertainty. Inflationary pressures and their impact on economic policy influenced asset allocation and demand for safe-haven investments. The uncertainty index's sensitivity to domestic and international policies underscores the global interconnectedness of capital markets and the importance of stable macroeconomic conditions for investor confidence.

Over the five years to 2025, the investor uncertainty index decreased overall by 6.2 percentage points, but the volatility highlights exposure to economic shocks and rapid policy shifts. The period was marked by alternating phases of risk aversion and optimism, closely tracking major policy decisions and external shocks.