Macro Voices MacroVoices #482 Mike Green: What The Market Is Not Discounting
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May 29, 2025 Mike Green, Chief Strategist and Portfolio Manager at Simplify Asset Management, dives deep into the implications of current tariffs and the contradictions in government policy. He explores the effects of passive investing on market behavior and the hidden economic challenges it masks. The discussion also touches on the evolving role of AI in the economy, innovative high-yield investment strategies, and the intricate dynamics of Treasury yields. Green’s insights on measuring real interest rates and inflation present a compelling view of today's financial landscape.
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Passive Investing Inflates Market Prices
- Passive investing inflates the market by driving disproportionate capital flows to large companies.
- Large stocks like Apple and NVIDIA have much higher price inelasticity, causing price multipliers of up to $75-$100 per dollar invested.
Inflation Expectations Are Distorted
- Inflation expectations measured by surveys are distorted by tribalism and methodology changes.
- Market-based metrics like five-year, five-year forward inflation swaps show declining long-term inflation expectations.
AI Will Drive Service Deflation
- AI is expected to be a huge deflationary force in services, which make up 75% of the U.S. economy.
- Productivity gains from AI will lower service costs and improve access for more people.