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Don’t underestimate the bull market in investors’ doubts.

Over the third quarter of this year, the Global Economic Policy Uncertainty Index reached its highest level in two decades. The uncertainty index, which is compiled by a team of U.S. academics and measures how frequently terms pertaining to the economy, policy and uncertainty crop up together in leading newspapers, is now substantially higher than it was during the global financial crisis of a decade ago.

That lofty level of doubt reflects how U.S.-China trade tensions, Brexit and other considerations are crippling the ability of companies and investors to feel much certitude about what lies ahead.

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It also offers one explanation for the prevailing lack of conviction in markets. Most major stock indexes finished the third quarter close to where they started. In fact, looking back over the past year, it’s remarkable how little has changed in the big picture despite rising recession risks, trade turmoil and other dramas.

In Toronto, the S&P/TSX Composite stands 3.7 per cent higher than it was one year ago. Meanwhile, the S&P 500 benchmark of big U.S. companies has gained 5.7 per cent, while in London, the FTSE 100 has fallen 3.9 per cent.

The single-digit shifts over the course of the year hide the massive turbulence that has been evident over shorter periods. Stocks plunged late in 2018, then rebounded spectacularly in the first half of this year. Since then, they have been largely flat.

This down-and-up-but-mostly-sideways course seems to be a reasonable response to a world where it is difficult to know what is going to happen next. Investors would love to find a place to run to, but it’s not clear where that place would be.

In a worst case, Washington and Beijing will escalate their trade war, Britain will tumble out of the European Union without a deal, Middle Eastern tensions will drive up oil prices, inflation will climb and central banks will hike interest rates in response. But it is equally possible all those worries will fade away.

If the third quarter reflected anything, it was a tendency among investors to rein in big bets. In Canada, the strongest performing components of the stock market were utilities stocks – power producers, infrastructure operators and the like. These boring, defensive stocks gained 9.1 per cent from the end of June. In contrast, marijuana stocks and other speculative ventures took it on the chin.

Over all, the strongest performing major asset during the quarter was gold, the traditional haven during times of stress. The precious metal’s price gained 4.5 per cent between the end of June and the end of September.

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Lately, however, bullion prices have tumbled as the risk of an imminent recession appears to be fading. The problem for investors is that while people seem to be reeling back their worst fears, nobody seems willing to wager on growth either.

In the United States, the market for initial public offerings has caught a chill. We Co., the parent of WeWork, postponed its long-awaited IPO in the face of growing skepticism. Other recent IPOs – including those of Uber Technologies Inc., Lyft Inc. and Slack Technologies Inc. – are trading well below their offer prices.

Until uncertainty fades, investors are likely to remain cautious and defensive. But when will that happen? The answer – as you may have guessed – is uncertain.

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