The Fourth Turning: Going Forward
Last week, we published Trump, The Fourth Turning and What It May Mean for Markets, which examined Donald Trump’s recent election through the perspective of "The Fourth Turning," an influential book by William Strauss and Neil Howe that suggests history moves in multi-generational cycles.
We continue the conversation this week by looking at how some alternative asset classes might perform during the next four years based on Trump’s stated priorities and goals as president and steps investors can take to prepare for the new administration.
Signs of a “Fourth Turning”
As we shared last week, the Fourth Turning is a time of intense disruption and transformation. In the past, Fourth Turnings were periods when existential crises such as wars, widespread internal protests, or economic collapse eventually brought about the restructuring of social, economic, and political institutions.
Fourth Turnings have also been characterized by escalating polarization, breakdowns in institutional trust and the rise of leaders demanding change and “tearing down” structures and thinking perceived as “outdated.”
There is no denying that “Trumpism” has gained ground in the U.S., but it’s not simply a domestic event; in recent years, other right-wing administrations have come to power around the globe. Investors seeking to preserve and grow their assets during the next four years should be thoughtful, adaptive and pragmatic. Navigating a second Trump administration will require them to strategically capitalize on opportunities while mitigating risks associated with The Fourth Turning.
Here’s a comprehensive guide on how investors can align their strategies, some actionable insights, and targeted asset allocations that could potentially prove rewarding.
Strategic Investing Opportunities
To capitalize on what may likely play out during the next four years, investors may want to consider focusing on real- and hard assets.
Given current interest rates, commercial real estate (CRE) may offer attractive investing opportunities. In particular, logistic and industrial properties may benefit from the Trump administration’s promises to restore manufacturing as well as the potential growth of eCommerce. Warehouses, data centers, and facilities that support “last-mile” deliveries may benefit from long-term demand.
Investors may also want to watch for sustainable real estate opportunities that allocate capital towards “green” construction and energy-efficient projects because companies and governments will likely need to continue prioritizing sustainability. Similarly, positions in both oil and gas — which may benefit from planned deregulation — might prove rewarding.
Real estate opportunities offering strong ESG credentials may appeal to both tenants and institutional investors who are focused on promoting support of sustainability. Meanwhile, commodities, such as gold, silver, and industrial metals, could serve as hedges against inflation and currency devaluation. Investing in metals such as lithium and copper, which are essential for the renewable energy transition, may also be advisable.
Private Markets & Alternative Investments
Investors may also want to focus on sectors that could benefit from Trump’s pro-business policies: technology, healthcare and domestic manufacturing. Companies leveraging automation and AI may also benefit. Distressed assets and turnaround opportunities in industries that are restructuring — retail, travel, and hospitality — where entire business models are being reimagined might also be worth consideration.
Private Credit
As banks tighten lending standards, private credit funds may be seen as an alternative lending solution for small and mid-sized businesses. Asset-backed loans and secured debt may be attractive thanks to the lower risk they provide. Meanwhile, a lower interest rate environment may spark competitive financing while maintaining strong covenants and collateral protections.
Venture Capital & New Technologies
As businesses seek to increase efficiency and reduce costs, technologies such as AI, robotics, and automation may see accelerated adoption. Another mark of the Fourth Turning is a surge in innovation driven by necessity. Investing in digital health, telemedicine, and biotech startups may offer opportunities as society focuses on the necessity of dealing with aging populations and disease prevention.
(Avestix has a strong focus on early-stage investment opportunities in new tech).
Digital Assets & Cryptocurrencies
As mentioned last week, cryptocurrencies, especially Bitcoin, are increasingly seen as an alternative store of value in a world of currency debasement. Allocating a portion of a portfolio to digital assets could offer both diversification and a potential hedge against traditional market volatility. Beyond cryptocurrencies, investing in blockchain infrastructure and decentralized finance (DeFi) projects may provide exposure to the broader adoption of digital financial services.
Small, Mid & Large Caps
Small- and mid-cap companies that benefit from deregulation and tax cuts may be well-positioned to grow. Industrials, consumer goods, and technology stocks that are less dependent on global supply chains could also perform well during the next few years.
Likewise, companies involved in manufacturing, logistics, and infrastructure may stand to gain from Trump's promised plans to bring more production back to the U.S. The Biden administration supported this and it's expected to continue as government officials and business execs prioritize domestic supply chain resilience.
Large-cap financial stocks may benefit from lower regulatory hurdles and a pro-growth agenda. Traditional energy companies could see renewed interest due to deregulation and increased domestic drilling. And while tech giants will likely continue to dominate, investors should remain cautious of potential regulatory challenges aimed in their direction. For that reason, large caps that offer elements of AI, cloud computing, and green technologies may perform better.
Preparing for The Fourth Turning
Navigating the Fourth Turning will require a blend of agility, strategic foresight, diversification and fortitude. Forward-thinking investors might do best if they:
Consider leveraging alternative assets to diversify away from overvalued public markets.
Watch for growth sector investment opportunities in technology, healthcare and green energy that align with macroeconomic trends.
Maintain a focus on resilient, income-generating assets such as real estate and private credit because they may offer an element of risk mitigation in a volatile environment.
Position for the long-term by embracing sustainability, innovation, and infrastructure investment opportunities that may help shape the post-Fourth Turing landscape.
Next Steps
Do you have questions about strategically investing for next year and beyond? Contact Avestix today.
