There's a New Trump Trade to Watch ft. Ron William

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1:29Thank you so much.

1:40Welcome back to Real Vision. I'm Ash Bennington. Today, I have the pleasure of speaking with Ron William, CIO and strategist for RW Advisory. By the way, I should say before we get started, Tickets for the upcoming in-person crypto gathering in Miami are now up for sale. Head over to realvision.com forward slash CG2025. That's realvision.com forward slash CG2025 to get yours. Ron, always a pleasure to have you with us. Today, great conversation on tap talking about the election and the election aftermath in markets. 50 ,000-foot overview, Ron. Where are we right now? Great to be back, especially with this thematic and timely moment into year-end post-election.

2:27And certainly our main strategy playbook is election fever, by the fact, fade, by the rumor, I should say, fade the fact. So we're looking for a potential extended and hotter than expected market, which will likely unwind as profit-taking kicks in, and a policy reality check also starts to unravel into the new year. So certainly more of the same in terms of risk proxies being strong, predicting the outcome of a Trump and Republican win, albeit the big surprise was that it was so decisive, so clear and broad-based in terms of the red sweep. But stronger markets, which still pressures that potential mean version risk that we've been discussing in previous sessions.

3:23Ron, I know that you've got some research that you want to walk us through here today. You've done some extensive deep dive on exactly this topic. Let's jump in. Yeah, sure. So the opening picture speaks a thousand words, but through a cartoon to enlighten us, but also to bring us on topic and to check some of those behavioral biases that continue through all market dynamics is credit to Hedgeye, the 50-50 coin toss outcome, which eventually was predicted in favor of Trump and Republicans. And I'm playing on the old song Fever by the rock and roll star Elvis Presley. But the big play there is that fever isn't a new thing.

4:15Fever started a long time ago in the sense that euphoria has been here for such a long time. It just got even hotter going into the election. And the big concern remains, even though markets did predict that result into November 5. Here we see rates, long-term 10-year rates in blue, resurging higher, in line with my prediction when we last spoke. Most people were looking for rates going down lower. We made a low, found support, and then pushed up higher. That was partly an inflation resurgence backdrop, which remains according to market charts, cycle timing, but also some of the data that's coming out.

5:09Let me just make sure our audience understands this chart here. because you're transposing the U.S. 10-year Treasury yield against Trump win odds on Poly Market. The suggestion here, the implication being that as the odds rose of a Trump win, so too in the same proportion you saw the odds rising of increased 10-year Treasury rates, as you point out, presumably because of the implication of inflation. Ever wanted to explore the world of online trading but haven't dared try? The futures market is more active now than ever, and Plus 500 Futures is the perfect place to start. Plus 500 gives you access to a wide range of instruments, S &P 500, NASDAQ, Bitcoin, gas, and much more.

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6:37Trading and futures involves the risk of loss and is not suitable for everyone. Not all applicants will qualify. Plus 500, it's trading with a plus. Yes, through expected fiscal policy in a Trump Republican administration, but also we saw a revival of animal spirits in the sense expectation for stronger economy, stronger markets with optimized taxation, deregulation, and other market and economic friendly policy. So case in point, S &P 500 back to all-time highs. Bitcoin, as we speak, at a new six-figure glass ceiling, 100 ,000. So all of these were the risk proxies that not only became more euphoric and ultimately consumed by the election fever, but also predicted the result that we now have confirmed after the fact.

7:40The big surprise was the fact that it was a fast, clear and decisive win, more so in the sense of the broad red sweep and the fact that the House and Congress is also likely one, and therefore policy mechanism would likely be that much more streamlined. So that was a little bit more of a supercharged upside surprise, which took markets higher than expected. But all in all, in the weeks going into the election, there was an expectation for the final result. It was only the month before that it was 50-50 coin toss territory. And then as the countdown began, markets were certainly pricing in what is now already confirmed.

8:27By the way, talking about 50%, I should say that as the vote counting continues, former President Trump now at 50%, Vice President Kamala Harris at 48.4%, so just over 1.5 % margin on the popular vote. Hi, Raoul here. Listen, I think we've got until 2030 before the economic singularity arrives. Now, it might not be the exact date, but it's around then. So we have about six years to figure out how to unfuck our future. I've put together a report to help you called Prepare for 2030. It's going to help you take the first steps in that journey to make sure you're secure past 2030. So just click on the link below and start your journey now.

9:13Interesting event risk, which has now passed. And certainly we've seen a risk clearing event with markets continuing strong, but also potentially overheating and the future risk of an unwind. And so this brings us into pattern analysis based on past elections going over 100 years. You can see here on the chart on the left, this two-stage predictive move, which plays into the old well-known saying, buy on the rumor, fade the fact. So going into the election, there's an upsurge as markets factor in that potential POTUS outcome. In this case, it was more correct than wrong. And then typically what happens is going into year-end, yes, euphoria and the fever continues.

10:10But remember, this is a fever of an existing fever in terms of market euphoria, which continues. And that then creates a profit-taking opportunity into the new year, coupled with a policy reality check. And that typically happens for each election cycle, particularly if it's a new incumbent. And I would say more so, and this is based on political commentators, if there is a disruptive policy change, for better or for worse, that initial change, of course, can create some market volatility. So that's what is likely expected into Jan 20. And then just keep in mind that the midterms typically produce an underperforming market as new leadership develops, rolls out new policy, in this case, potentially more disruptive than most.

11:03then that takes some time for it to roll out, impact, and for both the economy and the market to adapt. So this is what the chart on the right shows, that the average trajectory is sideways, underperforming with elevated volatility.

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12:23Let me ask you this. Obviously, we're looking at aggregates here. I'm guessing this is probably something like an arithmetic mean of all of those data sets that you put together. Are there any outliers? Does the distribution always follow the same pattern as the central tendency? Or are there some outliers here that could potentially show more optimistic or more pessimistic news for the potential implications of these data sets? Yes, absolutely. And good point. with all data. There's a base case and then there's best and worst. And certainly I'm right here and now presenting the average, typical historical analog.

13:07Now it's the pattern that we're looking at, not the repetition. That's the educational disclaimer that I often share in the sense that we're looking at the behavioral implications to market reactions in this case of macro event risks, such as presidential elections. But exactly to your point, there can be variations. And so those variations, it's worth looking back in time and seeing whether it's administrative related, whether it's policy impact, or whether it's market cycle, or all three of them. So certainly that will give a more tailored, nuanced focus on the current cycle that we're in. But on average, the pattern is exactly what we're looking at right now as a probable base case trajectory.

13:59And buzzword there, probable. Right. As leading in with this analysis approach, but certainly worth plugging in different scenarios, positive or negative. The one thing I would say is just be aware of overfitting statistics. And I say this carefully because, of course, it's something that I do just as much as other market experts. It's useful as a reference guide, but often only that. Market reality is exactly what follows in real time. And so that continues to be a live feedback that we continue to learn from stage by stage. But at the very least, having a reference point is useful, but one that is best used in the context of multiple scenarios and then ultimately after the fact confirmation.

14:59Having a review on the big picture global ranking model, the same framework that we looked at before, this shows the rotation that is played out post-election. Recall, it's those risk proxies that predicted the outcome, but also succumbed to the excessive fever and euphoria. And essentially, it's those risk proxies, Bitcoin equities, as well as rates with a mix of revived animal spirits, but also inflation, higher expectations for inflation with the fiscal policy impact. Some of the surprise that happened, of course, we saw an unwind in gold. You can see that just from left to right, long-term trend remains strong, but short-term, after being so strong for so long, 40 % from low to high this year, outperforming the equities, at some point in time, a healthy correction was likely.

16:02So that's what we're seeing here and now. But there is an inflection point ahead. And these risk proxies are likely topish and due and unwind as part of a profit-taking stage to come. One quick point I wanted to highlight on the question of crypto and gold. I know these are two favored markets generally and with the RV audience. is a smart diversification of the two. As both markets break records on the upside this year, 2024, it is worth owning a mix of the two rather than one or the other. So that way, as they both go up, it's a double win. But more importantly, as the volatility signatures return and that risk reward profile changes, It is worthwhile weathering the changes by owning both to different degrees, typically an 80-20 mix, 80 % gold, 20 % Bitcoin or higher or lower according to your threshold.

17:11But the point is you fare out better by owning both as part of a bold strategy, Bitcoin and gold. And you can see here the rotation over the last few years. This is based on the first half of this year, not complete. It's something worth keeping in mind, particularly as markets get frothy. Ron, this is such a great chart. And I think this is so well framed as you discuss it here today. Very often, this is framed as a food fight between gold and Bitcoin. But what you're saying here is quite the opposite, which is, no, this is about long-term diversification, and it's about hedging against potential inflation risk, rather than this war of words between the gold folks and the Bitcoiners.

17:59Particularly this year, when both markets have broken records and outperformed, there were times when gold was most unloved. Everyone wanted to own it, but couldn't see the absolute return evidence. And clearly this year, gold has shone. But that's also been overshadowed by Bitcoin hitting the six-figure milestone, 100 ,000 as we speak. And so instead of fighting between the two, in an inflationary environment where debt is still a gorilla waiting to be dealt with, certainly owning both more gold and a little bit of Bitcoin or other crypto coins makes sense. In addition to the fact that currency continues to devalue the money in our pocket, is weaker day by day.

18:48And so hedging that clear and present scenario, risk scenario, is best. And central banks around the world are doing exactly that, as well as private investors and institutions. Well, Bitcoin is damn close to that 100K glass ceiling, as you framed it, at about 96 ,000 right now, a little over 96K as we film. If we could just flip back to the prior chart, because Ron, this is always my favorite chart of yours. I love this because it just conveys so much information about your view of the world right there. And the thing that struck me most when I first saw this is it's really interesting. I think this may be the first chart I've ever seen of yours of this kind that had the strategic, tactical, and active number one position the same across all three time horizons in that Bitcoin.

19:37Yes, absolutely. So we're looking at calendar There are timeframes, long term, one year, medium term, quarterly, and short term, monthly. So they're all within trading or investing portfolio realms. And certainly when they all tally up, that's just telling you exactly what you already know. This trend is either strong or weak. And then the question of Bitcoin, clearly that's been strong, strong, strong. Previously, it was gold to a various degree. and then partially China in the sense of capturing that 50 % upsurge post-government stimulus. So we've had some rotations over the last few weeks, mostly inflation resurgence related, as well as more recently election fever and more of the same euphoria from this strong risk market that we've been in.

20:34What's interesting, of course, is when we get a dislocation in those strong trends. And that's what I'm expecting into the new year of 2025. And that's why having a model like this is worthwhile, because you can watch it in real time. And instead of kind of marrying up to whichever market we love most or are making more money in, we can have that big picture view of how greed and fear and ultimately money flow is rotating around the world across asset. You know, we talked about the best of the best. Let's talk about the worst of the worst in your view here. Strategic long term weakest single item oil rising a little bit over the tactical and short term.

21:20But why strategically so negative on oil? Great point. And I'm constructively bullish on oil in terms of upside surprises likely ahead, both on the chart tactical perspective, but also upside risks vis-a-vis policy friendliness in this new administration. Drill baby drill is the old saying now will likely be in terms of opening up the energy sector in the US, but also the geopolitical risks, which remain a risk premium to the oil chart. Now, looking at this pure trend analysis model, it tells us what we already know, that gold in absolute relative terms has been underperforming, but it has held that support at oversold conditions, if we look at the chart.

22:18And I'm happy to bring up that chart for future discussion, because I think that is the one commodity outlier that will likely hold its ground and produce some upside surprises, particularly non-consensus upside surprises. And it's worth looking at oil, I should say energy in equity terms, because that is probably the stronger manifestation of the energy move. In 2022, when inflation was real and back, the energy sector was one of the very few that outperformed in a strong way. And I think it's something for us to keep in mind. Shall we take a look? I don't have it ready here, but certainly on the underlying chart of crude oil, case in point, I can bring up the world time chart one second, which shows that market.

23:14Hey, by the way, while you're pulling up that chart, I'll give you a little bit of color here on some breaking news as we record here on Monday morning, November 25th. Article out, front page of the Wall Street Journal right now, talking about Scott Besson, who is President Trump's nominee to lead the Treasury Department Secretary of Treasury. By the way, if you're interested in a deep dive conversation, I did a fantastic conversation with Scott right on Real Vision. You can go and search for that and check it out. But Scott Besson talking about this three arrow approach, echoing the late Shinzo Abe, talking about these three points, a 3 % reduction in the budget deficit, 3 % getting GDP to 3 % growth and producing an additional 3 million barrels of oil.

24:02or its equivalent on a daily basis, this according to the Wall Street Journal. But this touches on your point of drill, baby drill, about the expansion of American energy policy. You can see on the real-time chart, live crude oil holding. So underperforming, yes, we know that. But holding its floor between$65 and$62. or call it 60 round number. But either way, it's holding. So that is a make or break level for the crude oil market and energy in general. If that were to hold, certainly that would be a constructive, bullish case for what you just said in terms of policy-friendly environment in the new U.S.

24:52administration, as well as the recent appointment cited. in addition to ongoing geopolitical risk premium that remains. And from a chart perspective, the best we can do is watch this chart and see which way it goes, let Mr. Market decide. But ultimately, that will be the key area to watch. So switching to U.S. equities, the risk proxy, which has experienced the election fever pre and now post and likely to be part of that playbook strategy of buy the rumor, sell or fade the fact going into inauguration, that continues to be part of a triple whammy headwind, which we've been talking about in previous sessions, Ash.

25:41And that is momentum, extremes, potential unwinding, rotation fragility, although more nuanced now with small caps popping to the upside and potentially having a pump and dump reaction ahead. And then lastly, which is more true now than ever, that bearish timing confluence that remains. So if we look at the updated chart on momentum and more specifically the trend pattern and momentum exhaustion signals, here we see an updated chart of where the trend is at into the 6 ,000 psychological level. Interesting that key risk markets going into and out of the election are hitting these key milestones, which is a great thing to experience, but also one to be cautious of, because they often do produce make-or-break reactions.

26:41So S &P 500, as an example, is into that 6 ,000 mark, which also serves as a trend ceiling resistance and a potential trend wave exhaustion signal, wave five, which could create a sharp reversal back into the election lows of 5 ,700, which is also a trend support area. Now, on the follow-up chart, this shows - Those are DeMarc indicators you're talking about when you've got those numbers up. Yes. So an overlay on that trend analysis is the momentum indicators based on Tom DeMarc indicators, which I know is shared on the RV platform. And Tom DeMarc himself has training insights on the academy. So please look there for more information.

27:39But essentially, it's part of the market timing toolkit that I look at. And what it shows is a legacy and still active, depending on which time frame you look at, time exhaustion confluence. So that's on the monthly, weekly, and daily. The weekly one has neutralized for now because the markets have continued with that election fever. And so that's on pause. But if you look at them together, what it does show is you get a high probability market exhaustion signal where the risk zone is just above the psychological level into new all-time high territory at 60, 50. If the market breaks above that, as is going to be obvious anyway, because that would be the resumption of the uptrend, then we can consider a melt-up extension bullish scenario.

28:37But if it doesn't, and it loses momentum and reverses into this key short-term tactical area, what I call the election price gap, that's what led to the fever and the euphoria. if we show signs of weakening into this area of vulnerability, previously strength, between 5870 and 5780, so just about a few hundred points or so, that's going to be your early stage signal that the market is hot, overbought, and likely to unwind to the downside. And just to reframe the big picture risk scenario that we've been looking at all this time, Ash, It continues to be potentially following the historical rhyme, not repetition.

29:27It's not a one for one, but a historical rhyme of the OA corrective pattern. Why? Because it's a bare case scenario. But the other reason is it's a bare case scenario that ended with an all time high. So it was when consensus were the most bullish, the most euphoric, and the most succumbed to fever, both in terms of Fed policy after the pivot, but also after the election. And it was thereafter that we got the rest of the fall in the following year. In this case, 07 into 08, here and now, between 2024 and 2025. Risk scenario, if it plays out and proven correct, if not, then we get a melt-up phase and look for another analog that might match up with that.

30:17But for now, this is the base to risk case that I'm working with. And the danger zone confirmation would be near the levels I just cited, 56, 70, and 5 ,400 on S &P 500. Ron, let me layer in this question for you. You're looking at DeMarc signals. You're looking at the cyclicality around elections. One point here, maybe the obvious one that I want to make, is on a trailing 12-month basis, S &P 500 up nearly 32%. Roughly, if you want to ballpark it, about triple the average annualized return on the S &P when you look back over a long time horizon. When you talk about that level of increase, nearly a third on a trailing 12-month basis, how does that impact the way you view it when you just look at that just tremendous bid it's been catching?

31:08strong momentum is strong momentum. And the trend is your friend. But it typically leads to stages of exhaustion and then signs of an unwind and a reversal. And the most poignant market reversals happen when we least expect it. So not to say that we should cry out wolf every single time the market's strong, But we should at least factor it in as part of a scenario planning framework. And that's what I've always been big on for years. Not one way trading up or down, but at least being aware of both sides of the trades. And certainly the most successful traders do exactly that. They can be bullish as hell or bearish, but they will flip to the other side in the back of their mind and mentally game what that could look like from a risk-orward perspective.

32:07My concern is that more people are narrowly focused one way with that consensus view, which has just got stronger post-election for different reasons. And that's when the so-called crowd and consensus opinion often gets it wrong. And by the way, we should say that's why you look at three time horizons on my favorite chart. Yes, absolutely. And that, I mean, in a game of probabilities, not certainties, when you get, whether it's life or markets, when you get confirmation across timeframes, as well as, you know, various overlays, momentum, rotation, and timing, then that does make a stronger base case.