Investing in Unpredictable Times: What John Chang’s Economic Outlook Means for Investors

Economic conditions are shifting faster than many investors are used to. According to John Chang, Senior Vice President of Research and Insights at Marcus & Millichap, uncertainty, not optimism or pessimism, is the defining force shaping today’s investment landscape. Speaking at his sixth consecutive appearance at the conference, Chang explained why investors must prepare for volatility, inflation risk, and structural changes across labor, housing, and capital markets.

A Year Defined by Uncertainty

Chang described the current environment as unusually fluid, noting that he had to revise his presentation just one day before speaking because new developments were already changing the economic picture. He emphasized that the challenge is not ideology or opinion, but unpredictability, particularly under the new presidential administration.

Oxford Economics summarized this period with a simple message: “Buckle up.” Chang agreed, explaining that markets are reacting not to specific policies alone, but to the speed and frequency of change. This uncertainty is already influencing investment decisions, hiring plans, and capital allocation across the economy.

Has the Economy Achieved a Soft Landing?

Chang questioned whether the economy has truly achieved a “soft landing,” which he defined as inflation being fully under control. In his view, inflation has not yet met that standard. While inflation had been trending downward, it has recently ticked higher again, suggesting that the landing may be incomplete.

This uncertainty sets the stage for Chang’s five core predictions for the year, each of which has implications for investors evaluating risk, timing, and strategy.

Tariffs and Inflation Risk

Chang identified tariffs as a major inflationary risk. Recent tariff actions involving Canada, Mexico, and China, covering roughly 41.5% of total U.S. imports, illustrate how quickly policy can change. Even if tariffs are temporary, Chang explained that repeated adjustments prevent prices from stabilizing.

He outlined how tariffs affect everyday goods and construction materials. Fresh produce from Mexico, consumer electronics and clothing from China, and lumber from Canada all face higher costs when tariffs are applied. If tariffs remain in place or expand further, Chang warned they could push inflation higher throughout the year.

Economic Growth Faces Headwinds

Current forecasts from Blue Chip economists still point to approximately 2.2% economic growth, though Chang stressed these estimates may already be outdated. He noted that tariffs alone could shave roughly half a percentage point off growth, with additional downside risk tied to immigration policy changes.

Inflation, which currently sits around 3%, could rise to 3.5% or higher if tariff pressures persist. When combined with labor constraints from deportations and reduced immigration, inflation could approach 4%, complicating the Federal Reserve’s policy decisions.

Immigration, Labor Supply, and Wage Pressure

Chang addressed misconceptions about labor participation, pointing to data showing that participation among prime-age workers (25–54) is near its highest level since 2002. The labor shortage, he explained, is not due to lack of effort but to structural constraints.

Immigration plays a key role. During periods of restricted immigration, labor shortages increased. When immigration expanded, shortages narrowed significantly from over six million unfilled jobs in 2022 to under one million today. Chang expressed concern that deportations and reduced legal immigration could again tighten labor markets, particularly in construction, agriculture, healthcare, and hospitality.

Fewer workers would place upward pressure on wages, adding another inflationary force at a time when policymakers are already struggling to maintain balance.

Interest Rate Volatility Is Likely to Continue

According to Chang, interest rates will remain volatile throughout the year. Recent market movements show capital rapidly shifting between stocks and bonds, driving sudden changes in yields. What investors consider “normal” interest rates depends heavily on their experience, but Chang suggested that rates around 4.5% align with longer-term historical averages.

However, volatility is the key issue. Rates could move quickly between 4% and 5%, making timing critical. Chang advised investors to be prepared to act fast when opportunities arise, especially when financing terms briefly improve.

The Federal Reserve and Elevated Uncertainty

Chang highlighted the role of uncertainty in shaping Federal Reserve policy. He referenced an economic uncertainty index developed by economists at Stanford and the University of Chicago that currently sits at the second-highest level in history, surpassed only during the pandemic.

High uncertainty discourages businesses from investing and hiring, and it encourages policymakers to wait for clarity. Chang interpreted recent comments from Federal Reserve Chair Jerome Powell as confirmation that the Fed is holding steady due to the unknowns ahead.

Housing Shortage and Multifamily Strength

Despite economic headwinds, Chang identified one area of relative strength: housing. The U.S. continues to face a housing shortage driven by demographics and affordability challenges. Millennials, the largest generation, are forming households later and renting longer, while first-time homeownership now occurs at a median age of 38.

Home prices remain elevated, and the gap between renting and owning has widened to record levels approaching $1,300 per month. As a result, fewer renters are transitioning into homeownership, supporting higher lease renewal rates and rent growth in the multifamily sector.

Construction is slowing sharply, with multifamily starts down significantly from their peak. Chang noted that absorption exceeded new supply in late 2024, contributing to declining vacancy rates and improving fundamentals.

Capital Flows and Inflation-Resistant Assets

As uncertainty and volatility increase, Chang expects capital to rotate toward assets perceived as more stable. Cap rates have adjusted upward across real estate sectors, increasing yields compared to recent lows. While leverage remains tight, investors are actively pursuing value-add strategies where returns can improve over time.

Despite recent deployment, Chang noted that roughly $200 billion in capital remains available for real estate investment. He concluded that inflation-resistant hard assets, particularly real estate and gold are likely to remain favored as investors navigate unpredictable conditions.

Final Thoughts

Chang’s outlook does not predict collapse or crisis, but it does call for discipline. Elevated inflation risk, volatile rates, labor constraints, and policy uncertainty require investors to be deliberate, informed, and flexible. In an environment where change is constant, preparation, not prediction, becomes the most valuable strategy.