#1526 Darius Dale | Trump Tariffs Will Destroy The Economy?!
🎯 Summary
Podcast Episode Summary: #1526 Darius Dale | Trump Tariffs Will Destroy The Economy?!
This episode of the Pomp Podcast features Anthony Pompliano (Pomp) in conversation with Darius Dale, Founder and CEO of 42 Macro, focusing heavily on the macroeconomic implications of potential Trump-era tariffs, the structural shift in the global economy (the “Fourth Turning”), and the resulting volatility in risk assets.
1. Focus Area
The primary focus is Macroeconomics and Geopolitics, specifically analyzing the economic conflict between globalization (Wall Street) and protectionism/localization (Main Street/Industrial Sector), framed within the context of a potential “Fourth Turning” regime shift. Secondary topics include Federal Reserve policy errors, market volatility dynamics, and the concentration of wealth.
2. Key Technical Insights
- Globalization’s Impact on Income Distribution: Globalization has led to corporate profits rising to ~14% of Gross Domestic Income (up from a long-term mean of ~9%), while the labor share of national income has fallen to ~51-52% (from a mean of ~56-57%). This shift represents roughly $1.5 trillion annually moving from households to corporate profits.
- Extreme Market Volatility in the Fourth Turning: Since 2015, the market has experienced either a 20% drawdown or a 20% gain in every calendar year, indicating volatility far exceeding normal business cycle fluctuations due to geopolitical and policy forces.
- Volatility Drag: A key concept explained is volatility drag, where even identical average annual returns result in significantly lower final portfolio values if the path taken is highly volatile (e.g., a smoother path yielding $338 vs. a volatile path yielding $200 over three years, both with 50% average annual returns).
3. Market/Investment Angle
- Wall Street Reluctance: Wall Street analysts are highly reluctant to acknowledge the structural shift away from globalization, leading to overly optimistic revenue and earnings estimates for the S&P 500 that do not account for contractionary fiscal policy (tariffs) or the new paradigm.
- Recession Risk: The combination of contractionary fiscal policy (tariffs) and the Fed maintaining restrictive monetary policy (due to lagging inflation indicators) significantly increases the risk of a technical or actual recession, especially given the robust labor market data.
- Fed Policy Lag: Investors should not rely on the Fed for timely bailouts, as the central bank acts as a “janitor” cleaning up after the damage is done, often easing policy too late based on lagging indicators like employment.
4. Notable Companies/People
- Darius Dale (42 Macro): The expert providing the macroeconomic framework, focusing on structural regime shifts and data-driven analysis.
- Anthony Pompliano (Pomp/Pomp Investments): Host, emphasizing the divide between Wall Street finance and the concerns of the industrial/blue-collar sector.
- Jerome Powell (Fed Chair): Criticized for maintaining a restrictive stance based on an outdated 2% inflation target, potentially causing needless economic contraction.
- Nucor Steel CEO: Mentioned as an example of industrial leadership excited about tariffs leveling the playing field.
5. Regulatory/Policy Discussion
- Tariffs as Necessary Medicine: Tariffs are viewed as a painful but necessary component of the transition away from Paradigm A (globalization) to Paradigm B (localization), which benefits Main Street.
- Fiscal Contraction: Beyond tariffs, the discussion touches on the potential for significant spending cuts (Doge cuts) proposed by the Trump administration, which, while potentially preventing a fiscal crisis long-term, will be painful in the short term.
- Inflation Target Debate: Dale argues the Fed’s equilibrium core PCE inflation rate is closer to 3%, not the mandated 2%. Maintaining the 2% target forces restrictive policy that will unnecessarily damage the labor market. The Fed’s upcoming monetary policy review is criticized for conspicuously omitting a discussion about changing this target.
6. Future Implications
The conversation suggests a future characterized by higher structural volatility in asset markets driven by geopolitical friction and policy uncertainty. The transition implies that sectors benefiting from localization and domestic production will gain at the expense of those optimized for global supply chains. Investors must respect volatility drag and adjust expectations downward for corporate profits that were inflated by the globalization era.
7. Target Audience
This episode is most valuable for Professional Investors, Macro Strategists, Financial Analysts, and Policy Observers who need deep, data-backed insights into how geopolitical shifts (like tariffs) are translating into market structure and investment risk.
🏢 Companies Mentioned
đź’¬ Key Insights
"So ultimately you're talking about potential net debt growth of about $7 trillion if"
"Recall that the output gap was minus 0.3% when they launched the first TCJA. And we got a positive shock to growth then that ultimately wound up with still the deficit declining getting what worse when from minus 3% in 2017 to minus 4% in 2018 to minus 5% in 2019."
"The Federal Reserve is making a monetary policy mistake that's going to cost investors trillions of capital destroyed in stock market and crypto market crashes."
"Bitwise is the first and only Bitcoin ETF provider to openly publish its Bitcoin wallet addresses, allowing anyone to verify the fund's holdings."
"Bitcoin ETFs have taken Wall Street by storm. With over $35 billion in assets in just one year, it's become the most successful ETF launched in history."
"Did you know, Pomp, that 88% of all financial assets in this country is owned by the top quintile of investors?"