MacroVoices #505 Michael Every: Does Anyone Remember PMIs?

Episode Summary

Executive Summary: Macro Voices centers on Michael Every’s thesis that global markets are being reshaped by geopolitical and geoeconomic statecraft, not traditional macro data. He argues the U.S.-China rivalry is pushing the world toward bloc formation, capital controls, industrial policy, and financial tools like stablecoins. The post-game links this framework to positioning in equities, FX, commodities, uranium, and a relative-value short of Korean tech versus Nasdaq.

Main Topics: U.S.-China geoeconomic rivalry and bloc formation (Priority: 5/5): Every argues the world is moving toward a long-lasting contest between a U.S.-centric and China-centric system, with trade, industrial policy, and security increasingly intertwined. Economic statecraft replacing market-led globalization (Priority: 5/5): Tariffs, subsidies, export controls, FDI screening, capital controls, and currency tools are becoming standard instruments of policy on both sides. Stablecoins and the dollar’s strategic role (Priority: 4/5): Dollar stablecoins are framed as geopolitical infrastructure that could reinforce U.S. financial dominance and help reindustrialization efforts. Military and commodity chokepoints (Priority: 5/5): The discussion emphasizes rare earths, energy flows, shipping, chips, and industrial inputs as strategic leverage points in a de facto economic war. Market implications: AI, inflation, and sector rotation (Priority: 4/5): AI is portrayed as simultaneously inflationary and deflationary; markets may stay buoyant near term, but secular inflation and policy intervention could alter leadership. Trade of the week: short Korea vs long Nasdaq (Priority: 4/5): Patrick recommends a relative-value trade fading the narrow, AI-driven Korean tech rally versus more diversified U.S. tech exposure. Technical backdrop across major assets (Priority: 3/5): The post-game reviews SPX, DXY, oil, gold, uranium, and Treasuries with a cautious-to-bullish near-term bias in equities and a watchful stance on rates and commodities.

Key Arguments: The U.S. and China are in a strategic competition that is likely to persist for the rest of investors’ lives, not a temporary aberration. The current period is better described as a ceasefire to rearm than a genuine peace or durable G2 arrangement. Globalization has shifted from free-market efficiency toward state-directed security, resilience, and bloc alignment. The U.S. cannot simply “talk tough” without first rebuilding industrial and resource vulnerabilities; it is simultaneously trying to reshape allies, China, and its own economy. China’s leverage comes from rare earths, manufacturing depth, and export dependence; the U.S. leverage comes from financial dominance, high-end chips/software, and alliance structure. Capital controls are likely to expand, including controls over outward capital flows and directed foreign investment into the U.S. Dollar stablecoins may become a key geopolitical tool to reinforce the dollar system and channel capital into U.S.-aligned priorities. Markets will increasingly reflect policy goals rather than pure price discovery, creating a more segmented, ‘safari park’ environment. AI is both inflationary (power demand, capex, scarcity) and deflationary (labor displacement, potential concentration of profits, asset-price disruption). Korea’s tech rally is seen as too narrow and too dependent on memory chips and geopolitically exposed supply chains, making it vulnerable relative to Nasdaq.

Data Points: SP 500: 6796 - Down 136 bps week over week, consolidating off recent highs. U.S. Dollar Index (DXY): 99.92 - Up 80 bps and testing the 100 level. WTI crude (Dec): 59.60 - Down 146 bps; near the $60 area. RBOB gasoline (Dec): 194 - Up 265 bps week over week. Gold (Dec): 39.92 - Down 20 bps; noted as holding above its 50-day moving average. Copper (Dec): 498 - Down 532 bps. Uranium: 7875 - Down 296 bps. U.S. 10-year Treasury yield: 4.13% - Up 5 bps. EWY ETF performance since April lows: up more than 100% - Patrick cites the Korean equity rally from Liberation Day lows. Nasdaq 100 performance since April lows: roughly 50% - Used as the comparator in the long U.S. tech / short Korea trade. Korean implied volatility: 44% - Patrick says EWY implied vol has doubled over two months from 22%. Korean implied volatility prior level: 22% - Referenced as the earlier volatility level for EWY. QQQ implied volatility: around 20% - Used to contrast with the higher volatility in Korea. Gold prior move: $1,000 rise - Eric references the prior run from $3,400 to $4,400 after a similar technical setup. Gold prior range: $3,400 to $4,400 - Used to illustrate the previous measured move in the gold bull market. Breadth: about 40% of stocks above their 50-day moving average - Eric and Patrick highlight weak internal market participation. U.S. market concentration: Mag-7 dominance - Used to describe reliance on a few mega-cap tech names. AI and valuation comparison: NVIDIA market cap exceeds Germany GDP; Microsoft exceeds France GDP - Eric uses this to illustrate the scale of AI enthusiasm. Crude technical level: $62 - Patrick identifies this as a key upside breakout level for WTI. SPX downside trigger: below 6700 / below 6600 - Eric highlights these levels as key risk zones for systematic deleveraging.

Pivotal Quotes: "I think what we have here is a ceasefire to rearm, if you will, quite literally." — Michael Every: Describing the Trump-Xi outcome and broader U.S.-China strategic posture. "Markets will be moving from a world where they can do whatever they want... to a safari park." — Michael Every: Explaining his view that policy will increasingly corral capital and trade within designated lanes. "These dollar stablecoins are... entirely geopolitical." — Michael Every: Arguing stablecoins are infrastructure for a redesigned dollar-centered financial order.

Implications: Investors should expect more policy-driven markets, tighter capital flows, and greater bloc segmentation. Near term, AI and U.S. tech can still lead, but relative-value opportunities, commodity bifurcation, and geopolitical shocks may dominate returns.