Grant Williams sat for Matt Zeigler's podcast earlier this month and they covered a lot of ground mostly related to the Fourth Turning. The very high level on Fourth Turning is that it is the last section of a 100 year boom and bust cycle with different phases and as Grant described it, the Fourth Turning of the current 100 year cycle has started which means a lot of pain and hardship on the way to the next cycle when things are good again.
You can take all of that however you like but there were a couple of very interesting ideas expressed that resonated with me and I think we've been working on here for a long time. I think I am probably less pessimistic about the impact of The Fourth Turning than Williams is but hard to say about that.
We can use the term regime change to frame this conversation, the regime change for bonds with duration has already happened. I think I was able to get out in front of that thanks to a little bit of understanding of bond math (how much prices can drop when yields rise) as well my trying to assess the adequateness, or lack thereof, of the compensation available for holding longer term debt.
If the regime for domestic equities is going to change toward more of a 1970's story or 2000-2009 story where foreign leads and domestic does poorly, that hasn't happened yet. If it hasn't happened yet and if this is a concern of yours, you are not too late to get out in front of a 1970's/2000's repeat. Yes, many foreign markets outperformed domestic last year but domestic did not do poorly, the S&P 500 is 2-3% from its all time high after a strong 2025.
Grant talked a lot about gold and commodities as ways to address the Fourth Turning where domestic equities do poorly. Foreign also has a good chance of doing at least ok. From 1/1/2000-12/31/2008, the S&P 500 compounded negatively at 1.93%, foreign developed as measured by VEUSX compounded positively at 2.23% barely sticking with inflation while emerging as measured by VEIEX compounded at 10.87%. Maybe another lost decade would be different but no foreign exposure seems like regret waiting to happen. If you go narrower than broad based indexes, going to the country level, I suggest looking a so called commodity based countries. iShares Canada (EWC) compounded 7.22% in the period we're looking at and iShares Australia (EWA) compounded at better than 9%. If Grant is right about commodities in a Fourth Turning scenario, those two (but there are others) have a decent shot. I haven't had Australian exposure for quite a while but will start looking around there.
The way we look at all sorts of alternative strategies can be more of an answer now than in the 2000's because of how the fund industry has evolved to offer access to many more strategies. More available strategies though means a lot more work sifting through the good and the bad which we try to do here, assuming you believe in alts in the first place.
AI can help make your research a little easier which gets us to the other point from the podcast I wanted to hit on. The threat that AI poses to white collar jobs is part of the discussion too. Grant said that he is glad he is almost 60 and not 20 so he doesn't have to worry about getting replaced by AI meaning that getting replaced is possible but that his personal consequence wouldn't be so terrible.
We've been kicking around the idea that middle age can be a great time of life because you have a little experience, hopefully have some money in the bank and hopefully still in good health with a high level of fitness.
The cliche that "kids today have it much easier" is dead. It might have died when going to college meant taking on mortgage-sized debt. I graduated in 1989 with $3000 in student debt. My payments didn't start for a few years and the minimum was $100/quarter. Not per month, per quarter. I don't know when AI first became a real threat to employment generally but it was long past me getting made obsolete early in my career or before my career even starts like people in their twenties today.
For people in the middle like maybe late 30's into mid 40's it's a little trickier. It's not realistic that someone at 45 would be ready to retire if their hand was forced compared to someone in their early 60's. But at 45, with a couple of good decisions someone could be a little ahead if where they need to be savings-wise, made some effort to develop new skills and be physically fit all toward having created their own optionality if their job is one that could soon be replaced by AI.
If the Fourth Turning is a thing, then this whole jag we've been on about optionality since forever ago will become even more important. That's not the best way to phrase that, I've always believed cultivating optionality to be monumentally important. Get started now, if you haven't already.
The information, analysis and opinions expressed herein reflect our judgment and opinions as of the date of writing and are subject to change at any time without notice. They are not intended to constitute legal, tax, securities or investment advice or a recommended course of action in any given situation.
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