MacroVoices #464 Michael Every: Lines on Maps vs Lines on Screens

Episode Summary

Executive Summary: Macro Voices episode 464 centers on Michael Every’s thesis that Trump 2.0 ushers in a more volatile era of “economic statecraft,” where tariffs, industrial policy, and geopolitical signaling are used to advance national-security goals. The interview argues markets must price in competing responses from China, Europe, and U.S. institutions, while the post-game sees equities supported but vulnerable at key technical inflection points across the dollar, oil, gold, uranium, and Treasuries.

Main Topics: Trump 2.0 and the return of volatility (Priority: 5/5): Michael Every argues the new Trump presidency will drive outsized market swings because policy is being used as strategic leverage, not just economic management. Early tariff threats and geopolitical signaling are framed as the beginning of a much larger repricing. Economic policy vs. economic statecraft (Priority: 5/5): Every distinguishes ordinary economic policy from economic statecraft: using tariffs, monetary tools, trade controls, and industrial policy to achieve foreign-policy and national-security objectives. He says this is the correct lens for understanding the administration. China, tariffs, and geopolitical escalation paths (Priority: 5/5): The discussion explores how China might respond to U.S. pressure through RMB depreciation, supply-chain retaliation, or military/geopolitical moves around Taiwan and the Philippines. The key uncertainty is not just tariff levels but second-order responses. Greenland, Panama, Canada, and Mexico as strategic pressure points (Priority: 4/5): Every argues Trump’s rhetoric toward nearby countries is part of a broader Monroe Doctrine-style effort to secure the Western Hemisphere, reduce backdoor Chinese influence, and force allies to spend more on defense and border enforcement. European weakness and the need for reindustrialization (Priority: 4/5): Europe is portrayed as structurally vulnerable to higher input costs, weaker competitiveness, and geopolitical dependence. Every cites a need for large-scale investment and a more muscular industrial-fiscal stance to avoid long-term decline. Market implications: dollar strength, commodity pressure, and selective equity leadership (Priority: 5/5): Every’s top-down market view is that a more inward-looking, reindustrializing U.S. could strengthen the dollar, pressure commodities, and create a more fragmented cross-country investment landscape. Equity winners will depend on national policy alignment. Technical market setup across major assets (Priority: 4/5): Patrick Serezna notes equities are rebounding from extreme breadth weakness, the dollar is pausing near support, crude is correcting after a squeeze, gold remains breakout-capable but overbought, uranium is constructive but not yet trending, and yields are still in a trade range.

Key Arguments: Trump’s second term is likely to produce heightened volatility because economic tools are being used as strategic weapons, not merely to hit inflation or growth targets. Tariffs are not just trade policy; they are statecraft aimed at forcing behavioral changes in Canada, Mexico, China, and others. If China responds with RMB depreciation, the result could be a strong dollar, collapsing commodity prices, and broad global FX disruption. The U.S. goal is not to become number two to anyone; tariffs and industrial policy are instruments for preserving primacy and reindustrializing domestic production. The likely outcome is not an immediate U.S.-China shooting war, but a world of spheres of influence, more economic conflict, and renegotiated global rules. Europe is structurally ill-equipped for the coming environment unless it dramatically boosts investment, defense spending, and industrial competitiveness. From a market perspective, the dollar is the key pivot; if U.S. policy reduces global dollar liquidity, non-U.S. assets and commodities face pressure. Breadth has improved enough to support a rally, but the S&P 500 needs Mag 7 participation and continued broadening to sustain new highs.

Data Points: Macro Voices episode: 464 - Episode identifier in the introduction. Production date: January 23, 2025 - Stated in the opening narration. S&P 500 weekly move: +230 bps to 6,086 - Patrick’s Macro Scoreboard week over week. U.S. dollar index weekly move: -75 bps to 108.27 - Dollar pulled back after a short-term high. WTI crude oil monthly contract move: -575 bps to 75.44 - Oil corrected from recent highs. RBOB gasoline move: -502 bps to 208 - Fuel prices also eased. Gold futures move: +195 bps to 2,770 - Gold traded above December highs. Copper move: -205 bps to 430 - Base metals softened. Uranium move: -47 bps to 73.40 - Weekly price change noted on the scoreboard. U.S. 10-year Treasury yield: 4.60% - Yield level on the scoreboard; later discussed as near the top of a range. Breadth low mentioned: 18% of stocks above 50-day moving average - Patrick described the market as extremely oversold before the rebound. U.S. military spending share of GDP: ~3.5% - Every contrasted current spending with past eras and NATO allies' low spending. Historical U.S. military spending share of GDP: 5% to 7% - Every said this was more typical in earlier periods. Europe fiscal investment estimate: ~5% of GDP or more annually - Every referenced his and Draghi-like conclusions about competitiveness needs. Potential EU spending burden: 6% to 7% extra per year - If Trump pressures NATO spending and Europe boosts investment simultaneously. Trump tariff threat: 25% on Canada and Mexico - Mentioned as a possible tariff starting February 1. Trump BRICS tariff threat: 100% - Offhand suggestion tied to BRICS currency actions. Potential measured move in gold: 3,000 - Patrick said a breakout could target this level. Stargate power need: at least 5 gigawatts - Patrick cited Mark Nelson on data-center nuclear demand.

Pivotal Quotes: "Welcome to a world of volatility." — Michael Every: Opening framing for Trump 2.0 market behavior. "Take him very seriously, but not always literally." — Michael Every: Used to interpret Trump’s tariff threats and geopolitical rhetoric. "If you have a U.S. president talking about moving lines on maps, along with other presidents doing the same thing. Why do you think lines on screens aren't going to move a very great deal?" — Michael Every: Closing argument on why financial markets should expect large repricing.

Implications: Investors should expect a more fragmented, geopolitical market regime where policy shocks, tariff risk, and alliance responses matter as much as macro data. Dollar strength, commodity weakness, and country-by-country equity selection may dominate.