MacroVoices #471 Tian Yang: Tariffs Will Continue Until Morale Improves

Tian Yang, CEO of Variant Perception, provides a comprehensive macro outlook in the context of Trump's policy changes. He argues that leading economic indicators (LEIs) remain important but must be contextualized with political trends, as survey data will be affected by tariff sentiment and policy uncertainty. Yang identifies two major strategic overlays: Trump repeating Reagan's playbook of using trade policy to encourage manufacturing reshoring, and the return of the Monroe Doctrine with America dominating the Americas while China gets Asia. The macro environment shows trend to slightly below-trend growth around 2%, but with sticky inflation above target, creating a stagflationary tilt. Yang outlines four potential recession paths: fiscal risks from DOGE spending cuts, tariffs killing the manufacturing recovery (getting 2018 Trump instead of 2017 Trump), housing weakness from higher rates, and high-for-longer rates affecting private credit. Their macro risk indicator sits at neutral around 50, suggesting mixed upside-downside risks. For equities, Yang sees modest downside risk with expectations too lofty, favoring energy over consumer discretionary and large caps over small caps. In global markets, he's taking profits on China and rotating back to India after extreme relative performance. For fixed income, fair value on 10-year yields is around 4.2%, with potential for a tradable range if yields break 4%. The dollar faces conflicting signals - models suggest slight bearishness but policy mix remains dollar bullish similar to Reagan era. On commodities, Yang has turned more cautious on gold despite the bull case, viewing it as fairly valued and preferring TIPS and industrial commodities, while noting that continued outperformance would require a 1970s-style monetary regime change.