Washington Moves from Shock-and-Awe to Structural Repositioning

Research evidence excerpt

Washington Moves from Shock-and-Awe to Structural Repositioning

Global | Washington Strategy June 25, 2026

Washington Moves from Shock-and-Awe to

Structural Repositioning

This note reviews the core pillars of our Washington research, revealing the

structural repositioning underway in U.S. policy. KTs: 1) Policy uncertainty

resets to a new normal; 2) AI oversight takes center stage; 3) Trade shifts to

targeted risk; 4) Debt service costs now binding constraint; 5) USG holds 16

equity stakes and growing; 6) Warsh likely makes the Fed leaner; 7) Trump v.

Slaughter tests the limits of executive power. Watch our 30-min presentation.

Our Washington policy work is largely based on the framework we developed between public policy

and equity market performance back in 2024 (see here). Over the past two years, we have refined

and expanded the framework to cover seven distinct pillars. This note provides our latest updates

on each pillar and previews what comes next.

1) Policy Uncertainty – Resetting Lower Toward a New Normal. We have shown that policy

uncertainty, measured by the Economic Policy Uncertainty Index (EPU), is an overarching risk to

equity performance regardless of policy type, but the relative level is what matters (see here &

here). While EPU since 2025 has been structurally higher than in prior years, it now sits 34% below

the Liberation Day peak, limiting equity downside. Two factors explain the reset: (1) investors have

a clearer mental model of the administration's negotiating style; and (2) trade policy uncertainty

has eased materially following the Supreme Court's decision striking down IEEPA tariffs (see here).

The next key question is whether the November midterms will meaningfully raise uncertainty (see

here & here).