MacroVoices #502 Tian Yang: A Whiff of Reflation?

Date: October 16, 2025
Host: Erik Townsend
Guest: Tian Yang, CEO, Variant Perception

Episode Overview

This week, Erik Townsend welcomes back Tian Yang, CEO of Variant Perception, to dig into the global macroeconomic outlook, focusing on growth, inflation, and what Variant Perception’s leading indicators are signaling for investors. Amid renewed trade war tensions, synchronized global easing, and the ongoing debate on soft or hard landings, the episode explores whether we're actually seeing the early signs of a reflationary recovery. Key segments include detailed discussion of Tian’s indicator frameworks, regional macro narratives (U.S., China, Eurozone), and how these translate to actionable positioning across asset classes like the US dollar, commodities, and equities.

Key Themes & Discussion Points

1. Geopolitical Context: US-China Trade Tensions

Timestamp: 04:15 – 05:21

• Trump’s renewed tariff threats have ruffled markets but haven’t provoked the escalation seen in prior years.
  • Tian Yang: “I’m heartened by how measured the Chinese have been in response to this... this isn’t really the kind of tit for tat extreme escalation we saw back in April.” (04:37)
• Chinese strategy: Lowering US agriculture imports to create negotiating levers ahead of summits.
• Market impact is more posturing than genuine risk of 2018–2019-style trade war escalation.

2. Macro Outlook: The Whiff of Reflation

Timestamp: 05:21 – 07:15

• Variant Perception’s models show synchronized global central bank easing, improving liquidity, and resilience in growth, particularly in the U.S.
• The September Fed rate cut is potentially an "insurance cut"—not a pre-recession move but one that stabilizes growth.
  • Tian Yang: “We see a setup for a potentially reflationary environment... yields and dollar could actually squeeze a bit higher.” (05:34)

3. Leading Indicators – Signs of Recovery, Not Recession

Timestamp: 07:15 – 12:40

US Growth & Labor Market

• U.S. LEIs (Leading Economic Indicators) point to stable 2%+ annualized growth, as confirmed by high-frequency data.
• The current weak labor market is reminiscent of the 2002-03 “jobless recovery”.
  • Tian Yang: “The last time you had hiring this weak but retail sales holding up was in 2002, 2003—a jobless recovery.” (08:15)
• Households are sustaining low savings rates and financial conditions are loose—risk of recession remains low unless stress in financial markets combines with a labor shock.

Inventory & Lending Cycles

• Banks’ willingness to lend is improving, with delinquencies likely past their peak.
• Retail sales for discretionary items have returned to growth; durable goods revenues are accelerating even as inventories remain low, suggesting the beginnings of an inventory rebuilding cycle.
  • Tian Yang: “These are more signs of the potential for recovery than not overall.” (13:53)

4. Inflation: Sticky But Not Spiraling

Timestamp: 14:27 – 15:56

• U.S. inflation expected to hover around 3% annualized; risk of a second inflation wave considered low for now.

• Producer price index (PPI) and import prices are rising moderately, but major input cost pass-through is contained.

  • Tian Yang: “We’re at a point where, yeah, there’ll be some moderate pass-through pressure on the inflation front, but PPI is not surging.” (15:20)

5. Regional Roundup

China: Gradual Improvement

Timestamp: 15:56 – 17:16

• Chinese small caps are outperforming, bond yields have bottomed, and employment PMIs are improving.

• Lead indicators for both growth and inflation in China appear to have bottomed and are recovering.

  • Tian Yang: “China overall doesn’t look as bad as it’s been. The economy is going from bad to slightly less bad, liquidity’s tailwinds are good, and asset prices are on board with the recovery story.” (16:17)

Eurozone: Green Shoots Emerge

Timestamp: 17:16 – 19:48

• Despite known structural headwinds (politics, energy prices), German business expectations have turned positive.

• More than half of German manufacturing industries report improving production expectations.

  • Tian Yang: “You’re finally seeing a more coordinated recovery in the German data...” (17:50)

• Market may be too complacent about eurozone disinflation risks; ECB policy is still stimulative, with further reflation possible.

6. Asset Allocation & Risks: Positioning for Macro Surprises

Timestamp: 20:00 – 26:56

• Lack of risk premium in credit and U.S. equities is a concern; watch for simultaneous upticks in cross-asset volatility and credit deterioration as correction triggers.
• Tactical hedges make sense during October’s catalyst-rich environment (Fed meeting, Trump-Xi summit, earnings season).
• Important sign: A bear steepening of the yield curve following Fed cuts could flag markets losing faith in policy and spark inflation fears.
  • Tian Yang: “We have this pretty decent macro Goldilocks setup—until the Fed overdoes it and cuts too much and inflation fears pick up.” (21:54)

Semiconductors & AI Bubble Debate

Timestamp: 23:39 – 25:37

• On capex cycles: AI-linked semiconductors remain profitable, with high marginal returns; software capital cycle is weaker.
• Calls for an AI bubble burst may be premature as sector profitability and capex dynamics are yet to turn negative.

Commodities: Bullish Outlook

Timestamp: 25:37 – 26:56

• Strong cyclical and structural backdrop for commodities, especially industrial metals.

  • Lagging asset: Oil—due to supply management, political pressure to keep prices lower, but bullish medium/long term.

  • Tian Yang: “We have a pretty unambiguously bullish commodity setup... the catcher [potential] is very good.” (26:12)

7. Big Picture: Resilience as the New Macro Imperative

Timestamp: 26:56 – 31:20

• The U.S. and China are shifting from globalization and efficiency toward resilience and national security in supply chains—a trend reminiscent of the “arsenal of democracy” era (WWII/FDR).
  • Tian Yang: "The biggest context is... both countries want to emphasize resilience... this is really about economic nationalism and supply chain resilience." (29:20)
• Both sides have lost some leverage due to rapid Chinese technological progress and U.S. underestimation of Chinese strengths (e.g., rare earths).
• Expect continued diplomatic posturing, but with an underlying trend toward decoupling and strategic resource buildup.

Notable Quotes & Memorable Moments

• On U.S.-China trade posturing:
  “Compared to when Trump first returned to office... China’s response has been a lot more measured.” – Tian Yang (04:19)
• On the risk setup:
  “Our US recession model risk is around 30%. So low-ish, but not zero.” – Tian Yang (11:58)
• Asset allocation caution:
  “Lack of risk premium in asset classes... it does make sense to keep some tactical hedges.” – Tian Yang (20:48)
• Commodity optimism:
  “We have a pretty unambiguously bullish commodity setup with our models as well.” – Tian Yang (25:41)
• Macro paradigm shift:
  “We are just moving towards a world that both countries want to emphasize resilience, supply chain resilience... economic nationalism and resilience in terms of supply chains and manufacturing.” – Tian Yang (29:35)

Segmented Timestamp Guide

• Geopolitical context/US-China: 04:15 – 05:21
• US growth, LEIs: 07:15 – 09:10
• Jobless recovery analog / labor: 08:03 – 10:21
• Recession risks & financial conditions: 10:21 – 12:40
• Inventory & lending cycles: 12:40 – 14:22
• Inflation update: 14:27 – 15:56
• China’s macro turn: 15:56 – 17:16
• Eurozone green shoots: 17:16 – 19:48
• Asset allocation and risk signposts: 20:00 – 23:39
• Semiconductors & AI capex: 23:39 – 25:37
• Commodities: 25:37 – 26:56
• Big picture macro shift: 26:56 – 31:20

Actionable Insights – Post Game Trade Segment

Trade of the Week (Patrick Ceresna):
Timestamp: 32:45 – 36:03

• Expressing dollar strength via March 2026 Euro futures put option at 1.1750 strike (cost: 198 pips or $2,475/contract).
  • Convexity play: Defined downside, open upside, low implied volatility environment is ideal for option buyers.
  • “This is a perfect environment to own convexity... you’re paying a small insurance premium to own convexity on a currency market that is priced for perfection.” – Patrick Ceresna (35:04)

Markets Coverage – Quick Hits & Views

• S&P 500: Testing critical support; options expiry week likely to keep markets contained unless downside breaks trigger additional systematic selling. (37:27 – 39:26)
• US Dollar: Still in consolidation; readiness for breakout with policy or geopolitical catalyst. (39:26 – 40:39)
• Gold: Parabolic rally; momentum strong but will be followed by a sharp correction as blow-off top forms. (43:19 – 44:29)
• Uranium: Miners leading; spot price confirmation needed. Short-term correction likely but bull market intact. (45:38 – 46:23)
• Copper: Remains strong but hitting resistance; policy headlines remain wildcards. (47:02 – 47:42)
• Treasuries: 10-year yield at critical levels; risk-off signals possible if breakdown confirmed. (48:21 – 49:04)
• Oil: Weak in the short term under political pressure, but medium- to long-term bullish setup remains. (41:51 – 43:19)

Variant Perception’s Services

Tian Yang: “We focus on building investment models... modeling the economy, asset classes, market behaviors, and long-term capital cycles. From those we find outliers or interesting investment themes.” (31:32)

Conclusion

This episode delivers a cautiously optimistic picture driven by synchronised policy easing, resilient growth signals, and moderate inflation. Risks remain, particularly from policy surprises and geopolitical noise, but the base case is for reflation and market recovery with notable opportunities in commodities, USD strength, and tactical hedging. The structural shift toward economic resilience is setting the tone for the next macro era.

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