Markets have soared over the past two years, with an extra push after Trump’s U.S. election victory—but is this euphoria masking deeper risks? James Connor sits down with Ron William, CFTe, Founder & Principal Market Strategist at RW Advisory, who shares his insightful analysis and exclusive chart presentation to uncover late-stage market signals, historical parallels to 2008, and inflationary trends that could reshape 2025 and beyond. Learn how behavioral sentiment drives market dynamics, why Bitcoin’s momentum may reverse, and where commodities fit into the picture. Packed with actionable insights, this must-watch interview will prepare you for the challenges and opportunities ahead.
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Ron William 0:00
Our view is that we’re likely going to get a hybrid off the bad and the ugly. We’ve had such a strong bull and business market cycle, the autumn and winter season is longer overdue. We want to make money and we want to manage risk as best as we can, both as much as possible, but definitely not to be blindsided by the risk side, particularly in a strong market.
James Connor 0:25
Hi and welcome to wealthion. I’m James Connor. Well, 2024 is coming to an end. I cannot believe it. And 2025 is just around the corner. And if you want to start the year off right, consider having a discussion with a vetted financial advisor, wealthion.com/free, once again, That’s wealthion.com/free to find out more information, now onto the show.
James Connor 0:53
Ron. Thank you very much for joining us today. How are things in London?
Ron William 0:56
All good, focusing on the markets as we wrap up into year end, post election, and certainly looking out to 2025, in terms of what next?
James Connor 1:08
Yes, it’s hard to believe there’s only a month left in the year, but for those who aren’t familiar with you and your firm, why don’t you provide us with a brief overview?
Ron William 1:16
Yes, well, RW, advisory, essentially, focuses on research, advisory, portfolio guidance and external consultancy. The approach is global, macro, semi discretionary, anchored in behavioral, tactical analysis driven by cycles and proprietary market timing overlays using a blend of qualitative and quantitative models, and that’s what we see on our opening visual, the blend of macro, fundamental and tactical, looking at all three together, where there’s convergence, but then equally, looking at potential leads, lags and divergence as part of the market story,
James Connor 2:03
and you also touched on behavior, and as we both know, a big part of the financial markets and the movements that we see on a day to day basis is all driven by psychology. Yes, absolutely.
Ron William 2:15
I mean, people drive markets and emotions drive people. So so they really do work hand in hand. We feed that through as part of the focus on differentiated Alpha capture, insightful idea generation, but often non consensus views, which are grounded within the behavioral approach, but also as part of a cross asset portfolio overlay. And certainly the behavioral sentiment piece is what’s key. It’s keeps us on track, as well as accountable to the changes in markets.
James Connor 2:48
So these financial markets, and I’m going to start with the S P, it’s like a runaway train. And it doesn’t matter what you look at like, so many stocks, Bitcoin, so many other asset classes, they’re just making new highs every other day. The S P is at or near 6000 it’s up 25% on the year. And why don’t we just start here with the US market? So what are your views of the US market? Do you think it continues to go higher into the new year? Yes,
Ron William 3:15
for now, the market remains a euphoric post election. However, the view on risk proxies, s5&p 100. Case in point is buy the rumor, sell or fade the fact vis a vis the past election. So November 5 was the expected Republican and Trump win. That’s what we see here on our follow up visual of interest rates, long term, 10 year interest rates, resurging higher from lower levels, but also tracking back then the Trump Republican win odds. So that was not so much the surprise factor. What was, was the clear, decisive and broad win in terms of the red sweep and the policy market implications in terms of fiscal policy potential, inflation tailwinds, as well as revived animal spirits for equity markets and deregulation friendly environment for Bitcoin. But what all of this means is that the market has just continued to get hot and euphoric into and then after the most important event risk in many years, and arguably even more than that, compared to other elections. And so what that will likely lead to is a overheated, overbought situation where those risk proxies that drove up into the election start to unwind in. To inauguration as part of a profit taking and reality check on the policy rollout to come. And that’s that’s something I can add more to in terms of the statistical work that we do here at RW advisory on election patterns, behavioral, sentiment and markets in general.
James Connor 5:19
Yes, by all means, why don’t you provide some more context to that? Well,
Ron William 5:23
for the equity markets, I mean, probably the best place to begin equities and markets in general is our global ranking model. And this looks at the world in terms of trends over time. And you can see here, from left to right, we have trend performance over time, long term, strategic, medium term, tactical and short term, active. But essentially, if you just think about the calendar dates of the year, yearly, quarterly and monthly, that’s broad brush strokes. What we’re what we’re measuring here, and what’s important is we’re not just looking at markets across the world in absolute terms. We’re looking at it cross asset. So we’re looking at the relative performance implications. What we see here is, of course, much of the election euphoria peaked out with Bitcoin now testing that psychological glass ceiling at 100,000k China, that’s that’s been an old story in terms of the post stimulus policy impacts, which led to an upsurge of about 40% in just two months. So we’ll see if that holds up. But certainly tactically, that’s been strong, and you can see that in green, but more specifically, you can see the rate, interest rate resurgence in pink. There up and then slightly unwinding more recently, and the USA, yes, it was at New all time highs, but there was a relative unwind compared to other markets, the rate of change is slower than it looks, and more so when you compare it to the rest of the world. And just lastly, just to highlight gold, which has been everyone’s favorite money this year, up 40% from low to high, and less so year to date, given the overboard unwind has also been an inflation gage as well as a safe haven vehicle, and it had a mini wobble after being so strong for so long, and that’s likely a Buy on the dip opportunity. So this is a macro market trend overview, highlighting what’s best and worst, but also how things have rotated pre and post election, focusing on your question on equities and S, p5, 100, it’s all part of a three part headwind that we still believe holds true in equity markets. And probably the most important chart is this one here on momentum being overdone and likely to unwind, partly based on the price pattern you can see here. This is what we term as a five wave impulsive edit wave pattern, which is a variation of some of the behavioral fractal work that we do. All that means is markets are strong, telling us what we already know, but it’s likely overbought profit taking will take place, and if it hits, fails above this resistance Trend Channel at 6000 on psychological round number on SB, 500 then rolls back down into the election price gaps, which I’ll show in the following chart, and then the support line near 5700 that’s when I strongly encourage everyone watching this discussion to re evaluate, consider profit taking, look for some downside hedges, no matter what your view is on the upside and how strong the economy might be or exuberant markets are, do at least consider a tactical view based upon that change in trend. And just just to give you the level on the election gap price gap, as the euphoria picked up, there was an election price gap between 5870, and 5780, about 100 points. So so that that would be the behavioral reversal point for the S, p5, 100, if we were to reverse back under that and that would confirm this overheated momentum signal here. Based on an indicator called demark momentum indicator.
Andrew Brill 10:04
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James Connor 10:46
So just to summarize a few of your points, you think at or around 6000 on the s, p, we’re going to hit with some resistance, and the market might pull back. And when do you think that would happen? Like before year end, or in early 2025
Ron William 11:04
so so this is what’s less clear on the timing part. Long term, we seem to be developing a overheated, overbought, long overdue market top, and that is likely to confirm more in the first half of next year, and I’ve got some cycle charts that I can I can share as a visual reference for everyone that wants to see Seeing is believing I know. So for that reason, I’ve kept it ready for later on, but also to make the point that the short term tactical has proved more elusive, more challenging than expected. So there are multiple scenarios which we’re playing out right now. And I think the most viable one is New Year, inauguration, Jan 20, where we start to see more tangible confirmation in the market either melt up extension or overheat, unwind further down. My money’s on the latter scenario. But to your question into inauguration, and just to add, a lot of people in the market are factoring in what typically happens at this time of the year, and that is the year end rally, otherwise known as the Santa Claus Rally, for any of those who are feeling festive. But essentially, what that is, is portfolio rebalancing into year end. And everyone kind of plays the beauty contest and want to make sure they’ve they’ve pulled in the best profits. And so that’s when they start to, you know, trim back profits and make sure all is good to end the year. And that typically adds to to the the the year end pattern. But we may or may not see that, because we’ve already had such a strong run this year, plus the euphoria that followed the election event may have muted some of that expected here in rally. And either way, the analysis suggests that we get a little bit more of a fade into Jan 20 inauguration.
James Connor 13:17
And so once again, I just want to clarify so on the high end, you think 6000 to 6050 and in terms of downside risk, somewhere between 5780 to 5870 on the s, p, is that correct?
Ron William 13:31
Yes, and it’s quite precise levels, purely because, I mean, it’s good to be on point and data driven, but also because it really is that tight a threshold on the price levels right now, if we get new all time highs, then it tells us what we already see, a strong market getting stronger. But it doesn’t take much for this market to demonstrate overheating and unwinding, which is why we’re so strong on this ongoing triple whammy, headwind momentum being one based on wave patterns and various momentum indicators, which are overextended and calling exhaustion now, but also rotation fragility is The second factor, and then the third one is the bearish timing Confluence. And just to add the rotation fragility piece is key, because right now, one of the strongest things holding this market up is small caps. And while that is good in terms of rotation and more breadth leadership. It’s a little bit of a concern, in the sense that small caps tends to be more volatile, and of late, has demonstrated a pump and dump pattern, ie we get some great surprises to the upside that fail shortly afterwards and collapse. Is in the opposite direction, and that is often a late sage cycle behavioral pattern, which we should be cautious of. And then, of course, just keeping in mind that the tech concentration that we’ve had is the biggest on historic records. You can see this chart here, developed by Goldman Sachs, but many other investment banks have have done similar analysis just showing the concentration risk on mega cap growth tech as being an ongoing point of concern. Yes, it’s a sign of the the disruptive opportunity in tech AI, we know the story, and most people are super bullish on that, including myself, but when the fundamentals and market expectations dislocate from the Reality of of of the price action, it’s during moments like that that we typically get a healthy unwind, not least on stocks like Nvidia, which is back at a new all time highs. But again, it doesn’t take much for a stock like that to have an impact, not just on the upside, but also on the downside, as part of that high beta two way factor
James Connor 16:22
and Ron The other thing that really stood out to me was the pullback that you’re looking for. It’s not much of a pullback. It’s less than 5%
Ron William 16:32
yes, absolutely. So that’s that’s purely in terms of clearer signals as to whether this market holds up or not, in terms of a much more bearish risk scenario. Certainly the one that we are following is the 2008 global financial crisis. Now that that’s, that’s, that’s going to concern a whole lot of people hearing me say that. And so I do say that carefully. It’s not let me, let me, let me back up with his with a disclaimer, it’s not a repetition of oh eight or any other time in history. It’s the pattern rhyme that we’re looking at. And so if you look at this chart here, the most important pattern rhyme comparison is what we term as a bullish trap signal, ie excessive euphoria on elevated leverage and typically low vol, all flipping The other way when ultimately, market consensus gets it wrong, and a lot of that portfolio positioning is forced to sell. It’s not a choice, it’s a pressure reversal that happens in the market. The same thing happened in oh eight. We had an all time high just after a Fed pivot, after many years of doing the opposite, and then we had a three stage corrective pattern, fall rally, rest of fall, but that middle part of the rally was an all time high, and ultimately a head fake, which then became A bull trap signal that then led into what became the historical top of 07 into 08 it was a six to 12 month topping pattern, but it began in the second half of one year and then developed over the first half of another year, which I think is what is likely happening here and now, between 2024 going into 2025 and this is typically when everyone is most bullish, most euphoric, and that’s the point. It’s non consensus. It’s not meant to be in line with everyone’s thinking. It’s the exact opposite. And for that reason, we get caught out. We’re blindsided, and typically it can be quite a turbulent and volatile change in market environment. And just to add what would confirm this pattern on S, p5, 100 right now is a move back through 5670 and then 5400 so not just 5% 10% 20% and of course, if you go back to bear market analogs, 30 to 50% in terms of the big bears. And just to, just to add one of my educational good, bad and ugly charts, is looking back at bear markets, the the small ones that are short lived, such as 87 and 2020, COVID which recovered way faster than anyone expected. Then the so called Bad during 2002 1008 a lot of people. Loop back to 2000 in terms of the tech concentration risk. And then last but not least, the one that I encourage everyone to have a strong cup of coffee or something even stronger. On the far right, the ugly chart, which is basically sideways roller coaster, volatile market environment such as the 1970s that included all shark and and ongoing geopolitical risk premium. And then lastly, of course, the infamous 29 Wall Street peak and crash. Now our view is that we’re likely going to get a hybrid off the bad and the ugly. I’d love to say it’s it’s probably going to be good days ahead, and summer is going to last for as long as possible. I’m here in the UK, and i i Miss summer, so I’m more than more than happy to project some of that bias onto the market. But the reality is, we have to go through different seasons of the year, and markets do the same. And given that we’ve had such a strong bull and business market cycle, the autumn and winter season is longer due, and this time will likely be a hybrid of of the two that I just mentioned, partly because of the inflation effect that is building up With all this debt and just general exuberant market moves so that will need to re shake out reset before a healthy bull market recovery follows.
James Connor 21:33
Yeah, so I have a few questions you mentioned about this level of euphoria that we have right now, and it is truly mesmerizing, watching what this market’s doing. So the s, p is up 25% on the year, but there’s individual stocks, like micro strategy that are up 500% on the year. Palantir is up 250% on the year. Nvidia is up 200% on the year. Like some of these moves are unbelievable. But you you mentioned that you think we might get a slight pullback, say, four or 5% but then in the following sentence, you said, well, we might get a significant pullback, like we saw during the great financial crisis of oh 809, how do you go from a very mild pullback to a more extreme one?
Ron William 22:23
Great question, and it’s worth going back to historical market analogs to help offer pattern guidance as to how markets can do that. 08 is probably the best example, and if I just re spotlight that path pattern analog. It’s a three stage corrective pattern where, where we get ebbs and flows, initially they fall, then a rally, and the rest of the fall. And so the answer to your question, in my mind, and according to our work right now, is that we probably get these short and sharp swings up and down in the early stage reversal pattern development, but once we get the confirmation and the rest of the fall that typically is either A sideways, volatile market or a downward waterfall slide to the tune of some of the historical analytics that we’ve seen. So there’s no one size fits all pattern to how bear market develops that’s unique from one market cycle to another, but it typically is a non trending, uncertain and elevated, volatile environment. So at the very least, we should prepare for that best case. The market continues to overeat some more, and the consensus view continues to project even higher targets on these markets. But I would say the better thing to do alongside that is to consider profit taking opportunities as well as downside hedges for a change of season, as we switch from hot summer to cold winter. Now,
James Connor 24:15
you showed in one of your earlier charts, one of the strongest asset classes out there is Bitcoin. It’s up over 100% on the year, and I can’t get over the amount of chatter on X relating to Bitcoin. But what are your thoughts here? Does it’s very close to going through 100,000 does it keep going? Yeah.
Ron William 24:38
I mean, clearly this has been the best performing asset bar none, just because crypto is crypto, and when it goes up, it really, it really does. It rockets. And just since the election of November five, it’s, it’s up more than 40% just since then, year to date, even more now and just. Just to add that’s partly down to the dereg Crypto deregulation story that is likely to follow a Trump Republican presidency. So there is policy tailwind as to why Bitcoin is strong now in the crypto complex in general, in addition to the halving cycle, and in addition to just a very strong and resilient trend, but nothing goes up in a straight line, there’s one thing I’ve learned in all these years of studying and trading markets and engaging with clients is exactly that. So do expect a zigzag behavioral pattern, even in strong markets like crypto, the average volatility, daily average volatility on Bitcoin is 20% so while it looks super cool on the upside, it can equally surprise on the downside. And I think most prudent crypto and Bitcoin, Bitcoin traders know that that’s, that’s, that’s the price they pay as part of the risk reward profile. But I would caution those that go all in late into the move, because it’s just when you expect to at least expect it that the market strong trend gets overheated, unwinds as people take profit, and ultimately as momentum rolls over. And that is true both from the price momentum indicates I’m looking at on Bitcoin and crypto, but also the cycle model. That I follow, which suggests that we could get a little bit of mean reversion risk coming into the new year on Bitcoin and most of the risk proxies that ran up into the election. Last thing I would want to encourage is a smart diversification across not just Bitcoin, but also gold. It’s otherwise known as bold, bold, a blend of the two. And if you just think of an 8020 allocation, 80% gold, 20% Bitcoin or less, depending on if, if you’re depending on, how supportive you are on either those markets, but that is a more prudent and and better diversification of your risk scored profile across both markets. I wouldn’t suggest going all in on crypto now, because I think most of the move is done and we’re likely going to get an unwind soon.
James Connor 27:39
And do you have specific targets for the upside than downside? Yes.
Ron William 27:44
So upside, we’re at it right now. 100,000 it’s a big figure. Celebrate. This is something that six digits, and we’ve been, you know, many crypto bulls have been talking about for some time, and we’ve hit a milestone. Can it go higher? Yes, and I don’t think there’ll be too much surprise to the upside, because it’s it’s pretty much expected and baked in in terms of the crypto dynamics. So certainly I’m happy to speak more to the upside once we get a shakeout, but not before, just because I think the mean version risk is probably stronger at this stage. And on that point, I would say at the very least, moved back down to the previous all time high at 73,700 is likely and potentially lower than that the 50,000 mark. So we can, we can literally swing the other way and still be demonstrating a healthy bull market correction with a lot more upside ahead. So if you just think about it, that alone, those levels alone, are big enough, maybe that’s a bound the dip opportunity for crypto, for those who maybe are feeling a little bit of FOMO and want more upside ahead, or maybe people who just want to profit, take and celebrate the year end season.
James Connor 29:04
Stan Druckenmiller recently gave an interview, and he said he looks like companies from the bottom up, and he doesn’t see any risk to the S P right now, or the NASDAQ and the US economy overall. But he did say the biggest threat to the economy and the markets in 2025 is inflation in a re acceleration of inflation. And he actually compared to the 1970s where inflation topped out at 8% they got it under control, or the they thought they had it under control, it pulled back to 3% but then it just took off again. And you have actually said the same thing where you thought there was a threat of inflation picking up again. Maybe you can speak to that.
Ron William 29:48
Yes, sure, we’re seeing that right here and now. And if we look at our follow up chart here on inflation resurgence, think 1970s is exactly the analog I’m working on again. It’s not the exact historical repetition of a macro environment now versus then, because clearly this time is different, but the pattern looks very similar. I’ve shown that pattern here in the bottom right chart, where you can see outright CPI data in blue, here and now, versus 1970s in red. And what that shows is, yes, inflation has unwound from a historic high that was made in 2022 and we had the shock in both interest rates and inflation, partly following the geopolitical tensions in Europe vis a vis Ukraine, Russia and the energy implications that followed, plus plus the general turmoil, both there and elsewhere and and for various reasons, inflation on wound, perhaps helped by central bank policy. But there could be a policy mistake ahead, because the market, which has the last word, is currently already resurging higher, both in terms of hotter than expected inflation, but actually, more specifically, inflation expectations, looking at break evens, you can just see the top right hand chart. This is a recent chart which, in the updated format, shows a rise to the upside, and that has also been the case for the main chart you see here on the left, which is an archive chart, this was correctly predicting the low three and a half percent on us long year rates, we’re now four and a bit percent. So that did work out, and as we saw in the opening chart, that was the inflation resurgence seen in break even rates, long term rates, as predicted here, which was aligned with the election result, and ultimately, the structural inflation ahead. Now the key message here is that not only is inflation resurgence ahead, but it’s likely going to be rolling waves of volatility of inflation, so that that brings a few behavioral characteristics with it. One, it’s disruptive by nature, and so difficult to predict. And two, you get a little bit of a rise and fall in inflation, so if and when we do get a market shakeout in euphoric risk markets that will be disinflationary or deflationary for a period of time, but And of course, we might get an unwind in inflation, but at some point in time, perhaps second half of next year and beyond 2025 second half into 2026 then we get the structural stronger inflation uptrend to follow, as we did in the 1970s
James Connor 33:14
So Ron inflation is around 3% give or take, let’s just assume that the numbers the government is telling us is correct. Where do you see inflation going?
Ron William 33:26
So certainly, I mean, we can go much higher than here. It’s i It’s less about the actual figure. It’s more about the rate of change. But, but to be specific to your question, I mean, we could go into the high digits from here, as we did before, in terms of long term rates, we could hit back to the 5% threshold, which is the historical level that we hit many times before, and will likely again. The only question is timing, when that happens and how that happens, but certainly the rate of change will be most important and just on a on a more practical and uplifting point in terms of what to do, if and when that were to happen. This would be a commodity super cycle story, and this is the one thing that we do have more conviction on in terms of a scenario that is likely to happen, but again, on the timing, that’s one thing that we’re continuing to watch. This chart here shows a ratio of equities relative to commodities. So when this is our equities is outperforming the latter, and currently you can see the opposite, commodities is underperforming equities and is super overstretched, oversold, undervalued, whichever term resonates for those listening. But long and short of it is, this is a generational rotation between soft and hard assets, or paper assets and hard assets. I should say. Yeah, and so the next rotation ahead is for commodities to outperform. And just to preface that, that could be a combination of various scenarios as to how this could play out. One, it could be equities down, commodities sideways or up over time. So it could just be the relative game before the structural outperformance. Two, it could also be the inflation resurgence to come. And three, keep in mind that if the US dollar were to make a peak, which I think it already did in 2022 and will likely weaken into next year than any further weakness in the dollar we’ve had strength so far into and out of the election, but any further weakness below 100 on the dollar index will be commodity bullish, Generally speaking, just because of the pricing mechanism on commodities being dollar specific, and so that would provide more tailwind. So think about some of the commodities that are already leading the way right now, precious metals, energy, in terms of the stock complex, potentially agri soft markets to follow. And you know, a story ahead, if we get an unwind in equities, more inflation or weakness in the dollar.
James Connor 36:32
So you mentioned you think the US dollar is going to it’s already topped out and it’s going to weaken further. Why? Yes.
Ron William 36:40
So the grand finale chart I have in terms of cross asset opportunities into 2025 is exactly that the US dollar King potentially to lose its crown. I think it already lost part of its crown in 2022 and you can see the top there at that price and time point. We did make the record high back then. We then developed a sideways topping pattern. The chart now is actually testing to the upside. This chart is not updated. So we’re, we’re at that B level right now, in terms of, you know, where the dollar index now, but if we were to unwind from those overheated levels back into the 100 psychological level, that would be the main make or break point, Where I would I would encourage wealthy and audience members, clients and students to reassess their dollar exposure, whether it’s outright or portfolio related, because that $100 mark based on the chart, is a decade Long floor in the market that, if broken, would provide more weakness. That’s also reflected in the cycle model prediction you see there in the in the bottom window, which just signals, you know, potential, two way volatility over the next few months. And then, just to end, what it shows on the the far right side, top. Far right is how the dollar compares with other currencies in the G 10 complex and it just shows, in terms of positioning and valuation, that the US dollar has been the outlier all this time. That’s partly been because of the policy divergences, which are not are now narrowing. We now have interest rate differential diminishing after the Fed pivot. We also potentially have a growth slowdown, depending on your viewpoint, on us, economic growth, certainly versus the rest of the world, it looks a little bit more sluggish. And I think over time, a slow but steady de dollarization trend, which could start to prevail even more. Just take a look at what happened recently as an anecdotal story in terms of the BRICS nation Summit, and look at the policies that they were actually discussing and proposing. It is all part of a longer term trend where the dollar remains King in terms of an important global reserve currency. But instead of a unipolar world, we start to shift into what is deemed a multipolar world. There are other opportunities and other economic centers that start to develop over time. This is being reflected a big picture macro theme in the chart, and that’s why I’m sharing this long term chart, just as a visual, but also as a reference point for people to follow if and when the dollar index breaks this kilo. All Okay,
James Connor 40:01
I just want to clarify one point. You said inflation is going to re accelerate in 2025 possibly up to our previous high, which was 9% and if that does happen, in order to quell that, the government’s going to have to, or the Fed’s going to have to increase interest rates, higher interest rates will result in a higher US dollar. How do you reconcile that with this lower dollar scenario?
Ron William 40:29
Great question, and it’s it’s also one that I get asked quite regularly in terms of cause, effect and correlation, and ultimately, the two parts that respond with to your question. One mark these, these factors often ebb and flow in their own unique way, and often not in the sequential order that we believe. So I think it’ll be a question of timing and the domino effect and how that plays out in hindsight, and then more more to the question at hand. This will likely be more the case in terms of inflation resurgence in a structural level, once we have a shakeout in the market. And so if you recall that I said, you know this, the base case scenario of it likely taking place, inflation, resurgence, long term structural as happening second half of 2025, more likely into 2026, the question, the bigger question, is, what happens between now and then? And I think between now and then we get that likely mean reversion risk to the downside on overheated markets like equities and anything else that is overrun, and that’s where the Fed or central bank policy risk is more likely because of The likely elevated volatility environment that will follow. But whether inflation happens immediately or later, I think we play the guessing game in the short term, but it becomes more real once we have a risk market shakeout, and the whole debt question becomes more front and center.
James Connor 42:21
So I want to ask you about this commodity super cycle, and oil is currently trading around $70 a barrel. Where could oil go to during the Super Cycle?
Ron William 42:32
Much higher this can more clearly be seen if you look at oil stocks. All Stocks have been strong for some time, although clearly they hit a ceiling and unwound. But look at what happened 2022 when there was last a surge in inflation and rates, oil stocks surged up higher. We didn’t really see it in the underlying oil, crude oil market. Having said that, what’s changed now is that is certainly we have an administration, us, administration that is more pro energy as that new saying, being revived, drill baby. Drill being being clearly supportive for the market in terms of more production. Look at the new appointee that has come into office now that is also very supportive of that market, but, but in combination, not just policy, in combination with ongoing geopolitical risk. Last time I checked, Europe is still in a conundrum, and we’ll see how that plays out. But also the Middle East is still hot, and latest headlines are that there might be an Iranian retaliation strike. Iran being a strong oil producer, that would be disruptive both oil and the global economy. These risks remain. They’re tail risks. We don’t know if they play out and if so, when, but certainly that does add a premium to the upside in oil, which, from a price dynamic perspective, lasts. Third and final factor is already oversold, range bound at key support. So even from a chart tactical perspective, surprises are likely on the upside in terms of what I just mentioned, policy friendly environment, vis a vis the new administration, geopolitical tension which remains there. Look at the latest headlines, and then, of course, the chart and tactical overlays which are oversold at support
James Connor 44:40
and gold can do very well during an inflationary environment. Do you have a target price for gold?
Ron William 44:45
Yes, absolutely. I mean, certainly we could see further upside into the 3000 mark. That’s that’s the next psychological. My. Stone level to the upside. Also, there’s an analog, which I don’t have ready here, but I can bring on for future discussions oil, oil and gold. But more to your question on gold typically spikes during uncertain and disruptive times. In 1980 gold actually spiked by several $100 in just a few weeks on the back of double digit inflation, as well as geopolitical tensions that also happened in but to a lesser extent, in the 1970s so go back in time, and gold really does rocket in a short space of time if uncertainty continues, coupled with further inflationary risks and devaluation of currency, remember, a big Part of the gold trend up is currency devaluation. The money in our pockets are losing value day by day, no matter what we think or believe, and So gold is the hedge reflection of that. And we’re now starting to realize that in terms of gold upside this year 2024, central bank demand alone has been at record levels and clearly also supporting, and we’re only just starting to see ETF flows starting to build into the gold market.
James Connor 46:32
Ron overall, you are concerned about the markets going forward, and you think there’s risk to the downside. And a lot of the people we interview on this show have been also very concerned in the past year, and they expect a significant pullback in some cases, but yet, we haven’t seen it. The market just keeps going higher and it keeps climbing this this wall of worry, and even myself, when I look at my own finances, for example, in the last few years, I’ve taken a very defensive approach, so I’ve gone underweight the markets and overweight gold, for example, and it’s cost me a lot in terms of performance. But what advice would you give investors on how to achieve this balancing act where you want to be ready for any sort of significant pullback, but at the same time, you still want to benefit from this ever increasing market.
Ron William 47:26
Great point, and I’m so glad that you brought it back to practical portfolio management terms, which everyone’s going to have top of mind in terms of, what do we do with our existing capital, both to benefit to the upside, but also manage the inevitable risk to the downside. The best strategy, and an educational insight I can share on that is a barbell strategy. That’s actually something a concept accredited to nalep, who published on the so called Black Swan and tail risk effect in markets. Essentially, it’s predicated on continuing to trade the trends that are looking strong in those risk proxies, but with selectivity and where possible profit take as well as so that’s one side of the so called barbell. On the other side, hedge downside risk, building some defensive play and a bit one, one strategy I’m a big fan of is scenario plan. Focus on potential scenarios, less on the predictive side, but more on the just, just scenario plausibility, so that we can be prepared for different types of environments. The best chart I can, I can share on that is just here up on the screen, and this is a lesson that took a while for me to hit home, both for myself and for people that I engage with, fear beats greed in volatile cycles, and what it shows is how portfolio equity curves perform through different market cycles. The top line is what happens x the worst 10 trading days. Risk management, bar none, is the best strategy. The blue line in the middle, which is still positive, but less so is buy and hold. If you did nothing but just buy and hold. Yes, you’re going to outperform, but not as much as if you’re going to risk manage when it matters. And then lastly, that so called FOMO effect. Fear Of Missing Out If we miss the best 10 days is not the worst outcome that we might imagine. It’s actually if, if we tried to be too brave for too long during those wild storms. So that’s more detrimental to the portfolio, and that’s what we should keep our eye on. Now the reality is, it’s a mix of the two. We we want to make money and we want to manage risk as best as we can, both as much as possible, but definitely not to be blindsided by the risk side, particularly in a strong market. And just to add some anecdotal investment wisdom. Warren Buffett famously said, predicting rain doesn’t count. Building arc stars, therefore risk management, hedging matters. But also the gentleman that you alluded to, Stanley Druckenmiller, had a 30 year, well known track record, which turned negative for one year in 2000 according to his own words, when he got pinched by the the feeling of FOMO and decided to get involved in markets just when it was way too strong. He knew it at the time, but in his own words, he felt the need to play so learn from the very best. Make money when you whenever possible, but please avoid not getting blindsided by the risk and how important it is, as you can see on this visual performance of X worst and best trading days in the market.
James Connor 51:16
All very good point. And Ron, I want to thank you very much for spending time with us today. And if someone would like to learn more about your services or follow you online, where can I go?
Ron William 51:25
Yes. So I’m available on RW advisory, our main firm website portal, and, of course, on social across the board. And for those interested to read free comments on substack, just to type in my name, Ron William, happy to follow up with questions, and I look forward to our next discussion. Jimmy on wealthion
James Connor 51:48
Once again, thank you. Well, I hope you enjoyed that discussion with Ron William, 2025 is just around the corner. If you have been neglecting your finances this year, consider having a discussion with a wealthy on endorse financial advisor at wealthion.com/free once again, you can find out more information@wealthion.com slash free. If you have any suggestions on who else you would like to see on the channel, let us know in the show notes below. We’re always looking for new guests. Once again, I want to thank you for being with us today. And if you want to check out more content on wealthion, check out this video now.
