Trump, the ‘Fourth Turning’ and What It May Mean for Markets
Politics aside, investors may find it useful right now to analyze Donald Trump's recent reelection and what it may mean for the markets through the lens of the Fourth Turning.
"The Fourth Turning" by William Strauss and Neil Howe suggests history moves in multi-generational cycles, each lasting about 80 years and representing one of four "turnings": High, Awakening, Unraveling, and Crisis.
Howe believes we are now in a Fourth Turning: Crisis. (The title of his 2023 book is The Fourth Turning Is Here.) “Crisis” is a period characterized by societal upheaval, the breakdown of existing institutions and broad change. According to proponents of the theory, The Fourth Turing phase typically culminates in a transformative event that helps reshape the social order, after which a new "High" period, one marked by renewal, begins.
In an upcoming blog, we will dive more deeply into this Fourth Turning and how it could further shape investing opportunities. In this piece, we will consider the Fourth Turning and offer some immediate, pragmatic thoughts on what it may mean for accredited investors.
Trump’s Reelection as a Catalyst
Trump’s return to the presidency this January can be viewed as a key event in a Fourth Turning timeline. His reelection, much like his entire first term, symbolizes — for some — a reaction against status quo politics.
Here’s how his second administration might fit into the broader Fourth Turning narrative:
Populist Surge & Anti-Establishment Sentiment:
Trump's reelection represents a continuation of the populist wave that began in the 2010s, with voters increasingly rejecting traditional political elites in favor of perceived outsiders who promised to overhaul the system. In the Fourth Turning theory, this wave reflects institutional distrust and calls for change.
Economic & Social Upheaval:
Trump's proposed policies, which so far emphasize aggressive deregulation, more tax cuts and reshoring of industries, can be seen as attempts to reshape the economic foundation of the U.S. His administration’s emphasis on dismantling what Trump views as a dysfunctional U.S. government reflects a Fourth Turning push to tear down and rebuild systems that — in the minds of some — no longer support U.S. national interest.
Polarization & National Identity:
The Fourth Turning is also marked by a struggle over national identity and values. Although it has only been a few days since the election results were finalized, the Trump administration's win has further polarized the country. This polarization could serve to solidify a new national consensus as the U.S. moves toward the climax of the Fourth Turning. The question of what the U.S. stands for will be at the center of this period, and may eventually lead to either renewed unity or deeper divisions.
Alternative Assets Going Forward
As the U.S. navigates through a Fourth Turning, driven by the Trump Administration’s aggressive policies, several potential economic and investment implications could play out during the next four years:
Commercial Real Estate & Private Investments
Trump's emphasis on reducing regulatory barriers and shifting responsibilities to states may result in a redistribution of power and resources, impacting sectors such as commercial real estate (CRE).
CRE investors may want to consider focusing on regions that align with pro-business policies, because those areas may witness the strongest CRE growth, especially in states favoring deregulation.
Meanwhile, Trump's continued call for reshoring and domestic infrastructure investment may create opportunities in private equity. If companies return manufacturing to the U.S., there could be an increased demand for logistics centers, warehouses and industrial spaces.
Venture Capital & Emerging Technologies
Historically, the Fourth Turning is a time of rapid innovation, as societies look for solutions that address existential challenges. Trump's second administration, with its calls for deregulation and domestic technological advancements, may contribute to growth in sectors such as artificial intelligence (AI), clean energy and biotech.
Deregulation could also open up opportunities in the digital asset space, meaning there may be a surge in cryptocurrencies. As institutions seek alternative assets amidst economic uncertainty, digital currencies may win favor among some consumer segments.
Private Credit & Alternative Lending
It’s unclear how traditional banks will fare and if they will face more or less regulatory pressures. If companies seek out more flexible financing options, the private credit market could benefit. Lower interest rates could also spur leveraged buyouts and direct lending, providing potential opportunities for private equity firms to acquire distressed or undervalued assets.
The increased issuance of government debt to finance proposed tax cuts and infrastructure projects may put upward pressure on yields in the longer term, impacting the cost of capital for private credit markets.
Small, Mid & Large Cap Markets
Trump's stated policies favoring domestic manufacturing, deregulation, and tax cuts — if he follows through on them — could benefit small- and mid-cap stocks, which are more sensitive to shifts in domestic economic policies. As a result, these companies may benefit.
Large Cap Stocks & Tech Giants:
While technology giants could benefit from proposed tax cuts and deregulation, they may also find themselves under increased scrutiny and regulatory challenges should the new administration curb Big Tech’s influence. One possible outcome might be a more level playing field for small- and startup tech companies.
Market Volatility & Sideways Trading:
The Fourth Turning’s crisis atmosphere can lead to periods of heightened market volatility. Investors should prepare for choppy market conditions as the U.S. navigates a new wave of socio-political turbulence. A focus on fundamental analysis, value stocks, and sectors with strong balance sheets may be critical for navigating this uncertainty.
Strategic Outlook for 2030 & Beyond
If we are indeed approaching the culmination of the Fourth Turning, accredited investors should consider several overarching themes:
Rebuilding & Renewal: As early as 2030, the U.S. could be entering into a new “High” period, where the rebuilding of institutions, economic systems, and social cohesion takes place. The policies implemented in the next few years could create the foundation of this new era, with a focus on resilience, innovation, and sustainable growth.
Focus on Resilience & Self-Sufficiency: Like the Biden administration, the Trump administration has been calling to bring manufacturing back to U.S. shores to reduce dependency on global supply chains. Calls from both administrations reflect a shift toward economic resilience and self-sufficiency, which may lay the groundwork for further global disruptions.
Generational Shift: As younger generations, particularly millennials and Gen Z, come into leadership roles, there could be subsequent shifts towards more progressive policies, particularly in areas such as climate change, technology, and social equity. This generational transition could once again influence the priorities of the post-Fourth Turning era.
The next four years under Donald Trump’s leadership may likely accelerate the U.S. through the climactic phase of the Fourth Turning. Politically, already deep divisions will probably become even more divided. In light of that, investors and businesses may want to put their focus on seeking out opportunities in reshoring and infrastructure; prioritizing domestic production; allocating capital to resilient assets; and embracing innovation and technology.
Traditionally, the Fourth Turning marks a time of both risk and opportunity. While the road ahead is unclear, turbulence can be expected. However, it may also present a unique chance for an economic reset. By understanding the patterns of history and aligning strategies accordingly, forward-thinking investors can position themselves to thrive in the era that may emerge once we move past the Fourth Turning.
Do you have questions about strategically investing for 2025 and beyond? Contact Avestix today.
