A data-driven pulse on policy uncertainty

Key points

• Today’s highly uncertain environment calls for innovative strategies to stay ahead of markets amid shifting U.S. policy dynamics.
• We leverage text analysis to gauge sentiment on policy direction, using it as a leading indicator to inform systematic allocation across policy-driven investment signals.
• Our use of LLMs to analyze shifts in tone and content across policy communications adds to the granularity of our analysis—helping us detect meaningful changes that can impact opportunities and risks.

Markets and investment opportunities are always evolving—but at times, the forces shaping the future diverge meaningfully from those of the past. That’s the case today as the Trump administration rolls out sweeping policy changes with wide-ranging potential implications. As systematic investors leveraging insights and models grounded in historical context, this raises a critical question: how do we stay ahead in a landscape defined by unprecedented change?

Navigating policy crosscurrents

Over our team’s 40-year history, moments like these have rewarded innovation in how we use data and technology to navigate complex investment challenges. Today, as government policy drives market uncertainty, we’ve built over 20 new investment signals aligned with the current administration’s policy priorities, including trade, immigration, reshoring, government spending, deregulation, defense, healthcare, energy, and more.

With this robust suite of insights, the focus turns to how we allocate risk across signals as market dynamics rapidly evolve—often in response to messaging from the Trump administration. This led us to develop a systematic timing model that analyzes communications from the Administration to help inform our exposure across policy themes. Among these inputs, direct text-based commentary from sources such as social media feeds has proven to be a leading indicator of policy direction—one we monitor daily to anticipate shifts in market focus. Using LLMs, we tag each statement to relevant themes and differentiate between concrete policy actions and broader sentiment. This analysis enables us to size and rotate policy exposures with speed and precision.

The chart below traces the progression of text-based commentary from the current Administration, beginning before the election to today. Immigration dominated the narrative leading up to and following the election. In early 2025, trade began gaining momentum, with a sharp rise in attention over the subsequent months. Immigration has since reemerged alongside trade as a leading theme, and more recently, there was a spike in the administration’s commentary related to healthcare. Although tax reform remains below previous highs in terms of overall attention, recent statements have increasingly been linked to intended policy action.

While this highlights recent trends in policy commentary, the true value of our approach lies in the model’s real-time application and ability to get ahead of fast-changing market conditions. Since Election Day, the model has outperformed an equal-weighted blend of our policy signals on a risk-adjusted basis, underscoring its potential to enhance alpha generation while managing policy-driven risks.

Getting granular with text analysis

The above chart captures the level of attention that the Administration has given to each policy theme—but that’s only part of the story. LLMs help us quantify not just what’s being said, but the nuance behind how it’s being said, relative to prior communications.

Rather than evaluating each communication in isolation, the model is able to track how the tone and content of commentary evolve over time within a given policy category. This added granularity supports more dynamic positioning across themes and relevant signals, with a clearer view of how rhetoric may evolve into actionable policy shifts.

For example, following Liberation Day in early April, trade policy remained one of the most prominent categories in terms of overall attention. But beneath the surface, the tone of commentary at times shifted toward negotiation—a nuance that could be missed by measuring the volume of comments alone. The ability to identify these changes in real-time sharpens our perspective and enhances our ability to cut through the noise.

Decoding policy uncertainty

In an environment defined by uncertainty and rapid change, investing with dynamism is essential. Static strategies risk falling behind as new forces continue to reshape the market landscape. Our approach to navigating today’s policy backdrop is built for this reality—leveraging data-driven insights and an innovative allocation framework to stay ahead of markets and turn uncertainty into opportunity.