MacroVoices #471 Tian Yang: Tariffs Will Continue Until Morale Improves
Mar 13, 2025
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In this discussion, Tian Yang, CEO of Variant Perception, shares his insights on the current economic landscape and investment strategies. He explores the impact of unconventional policies on macroeconomic indicators and emphasizes the complexities of inflation and potential recession risks. The conversation also addresses the significance of asset positioning amidst market volatility and examines key trends in commodities like oil and gold. Yang's expertise shines as he highlights crucial strategies for navigating the evolving financial markets.
Tian Yang emphasizes monitoring leading economic indicators while considering the unpredictable effects of policy changes on macroeconomic risks.
The podcast discusses the necessity of options strategies for hedging against market volatility, especially in uncertain economic conditions.
Listeners are advised to adopt a selective investment approach, favoring specific sectors like energy while managing overall risks.
Deep dives
Current Market Overview
The podcast discusses the recent volatility in the stock market, noting a significant 10% decline in the S&P 500 index in just three weeks, coupled with oversold market conditions. The hosts emphasize the importance of options strategies for hedging, particularly using options to manage risk in declining equity markets. Additionally, they provide a snapshot of various asset classes, including a decrease in the US dollar index and fluctuations in commodity prices such as crude oil, gasoline, gold, copper, and uranium. The conversation highlights the technical damage done to markets and assesses whether a short squeeze could occur in the near future.
An Insightful Interview with Tian Yang
Tian Yang, CEO of Variant Perception, provides insights into the impact of policy changes under President Trump, examining the importance of leading economic indicators (LEIs) amid a shifting political landscape. He discusses the need for a balanced approach to understanding macroeconomic risks, stressing that while LEIs provide an anchor for growth and inflation predictions, unexpected policy shifts may invalidate some traditional indicators. Yang suggests that the current economic environment reflects both upside and downside risks, drawing parallels to past economic policies from the Reagan administration. The conversation emphasizes the interplay between geopolitical influences and market responses, urging a cautious but adaptable investment strategy.
Downside Risks and Economic Scenarios
The discussion addresses potential factors that could lead to an economic downturn, including fiscal risks associated with large deficits and the impact of tariffs on manufacturing recovery. Yang outlines four possible scenarios that could escalate into recession-like conditions, indicating that while current data shows slowing growth, it is not yet indicative of a true recession. The podcast highlights the risks of a weakening fiscal impulse and tariff policies that could hinder manufacturing and housing sectors. Listeners are advised to closely monitor these developments to adjust valuations and investment strategies accordingly.
Investment Strategies and Market Outlook
The podcast emphasizes a neutral investment stance while reviewing the use of a macro risk indicator as a guide for positioning in various asset classes, particularly equities. The hosts recommend focusing on sector selection rather than taking broad directional bets, advocating for overweighting energy stocks while being underweight on consumer discretionary. The discussion includes insights into the necessity for maintaining some forms of hedging against volatility, especially as uncertainty prevails in the markets. The hosts suggest that within equities, a selective approach can help navigate potential downturns while capturing upside opportunities.
Future of Commodities and Gold
The podcast critically analyzes the outlook for commodities, particularly gold, noting its rich valuation and the factors that could suppress further price increases. The hosts argue that a substantial shift in the global monetary system would be necessary for gold to sustain high performance, suggesting that the market could face sideways movement before any significant rally. Alternatives such as TIPS (Treasury Inflation-Protected Securities) and industrial commodities are presented as potentially better entry points given their valuations. Overall, listeners receive a clear message regarding the need for cautious optimism and strategic adjustments as market dynamics evolve.
MacroVoices Erik Townsend & Patrick Ceresna welcome, Tian Yang. They’ll cover LEIs and break down Variant Perception’s outlooks on everything from stocks and fixed income to FX and commodities, including gold. https://bit.ly/41JzAaB
