Summary
The world is experiencing a fourth turning characterized by rising nationalism, economic challenges, and societal upheaval, necessitating a shift in investment strategies towards tangible assets and wealth preservation.
Global Societal Shifts
The Fourth Turning, a predictable societal cycle of boom, bust, and rebuilding, has become a global phenomenon, with America in the chaotic “bust” phase according to demographer Neil Howe.
Globalization’s decline, which began after the 2008 financial crisis, is accelerating under President Trump, who views it as a bad deal for the United States.
The rise of populist, authoritarian, and ethnocentric leaders in Southern and Eastern Europe, South Asia, East Asia, and Latin America since 2008 reflects the global nature of the Fourth Turning.
Political and Economic Dynamics
Trump’s administration acts as a catalyst in the Fourth Turning, but the outcome remains uncertain, mirroring historical examples like Napoleon and Caesar who unleashed primal forces without fully grasping the consequences.
Trump’s vision of a Golden Age includes deregulation, tax cuts, trade deals, manufacturing, and foreign investment, but faces contradictions in balancing trade deficits and capital inflows.
The Fourth Turning’s focus on building rather than experiencing will drive demand for materials and shift towards a new order centered on “real things” that transport us, as envisioned by Peter Thiel.
Social and Generational Trends
The millennial generation’s sensibility of investing in target date funds reflects a belief in community and collective support, contrasting with the individualistic approach of Gen Xers.
Fourth Turnings are characterized by a tightening of top-down control as governments impose new frameworks and the populace demands solutions to intractable problems.
Investment Strategies
In a Fourth Turning, prioritize absolute return and wealth preservation, focusing on risk management and hedging strategies rather than relative returns compared to indexes like the S&P 500.
Defense ETFs and gold have performed well in the new era and are likely to continue doing so as the Fourth Turning unfolds and the U.S. faces potential homefront problems.
Volatility will be continually underrated, presenting opportunities for tail hedging strategies and straddles, with sudden, huge market moves both up and down likely to occur.
Future Challenges and Opportunities
Conflict, both internal and external, is historically necessary to reshape institutions during a Fourth Turning, with potential scenarios including a Supreme Court confrontation or threats from Iran, India-Pakistan, or China.
The U.S. may face unprecedented homefront problems in future conflicts, such as cyber warfare, EMP attacks, or satellite strikes, unlike in previous wars.
Inflation is a long-term concern over the next 10 years, potentially equalizing burdens during a crisis by reducing the impact on creditors holding nominal bonds.