$274 million…
That’s what my hedge fund made between 2004 and 2012 for my clients around the globe.
These included some of the oldest Swiss banks, the Bank of New York, the Saudi National Bank, and a Luxembourg bank owned by the ruling family of Qatar.
We also enjoyed 20 profitable years in a row. That feat led to Jack Schwager covering me in his book Hedge Fund Market Wizards.
And Barron’s ranked my fund in the top 1% of hedge funds multiple times.
I achieved these kinds of results because I was always prepared to go against the grain – and make calls that were unpopular at the time.
I’ve continued to make those tough calls in recent years.
And I’m about to make one that could impact your portfolio for years to come…
Making Tough Calls
In January 2022, I predicted the major indexes would be down for the year – with the Nasdaq leading the fall.
Nobody wanted to accept it after the high-flying markets of 2021. But it proved to be the right call…
By the time 2022 closed out, the Nasdaq had lost around one-third of its value. Those who rode it out watched their accounts get smoked.
I made a similar call in early 2020 when the coronavirus was starting to take hold. After the market dropped 3.5%, I predicted far bigger losses to come.
Again, that forecast turned out to be correct…
This time, it only took a month for the market to lose 34%.
Those who heeded my warnings saved themselves a lot of heartache… not to mention money.
That’s why I want to get in front of you with my current prediction.
I’m not predicting a similar-sized fall right now. But I have serious concerns about the volatility about to sweep through the market.
Because it’s going to catch unwary investors napping…
Overextended Stocks
After a year-long rally, investors have gotten comfortable. They’ve become used to the status quo.
Each time the market retraces, they buy the dip and hold on. That’s been a successful strategy over the past year.
But the markets aren’t always so kind.
We’ve seen “famine” periods before that have lasted anywhere from a few months to several years. It doesn’t take a crash to set you back, after all.
All it takes is the market chopping back and forth, keeping your portfolio stagnant.
And right now, I believe we’re on the cusp of another dangerous period for investors.
After all, stocks have become way overstretched.
In the last 30 years, forward price-to-earnings have only been higher twice. That was just before the dot-com bust and the massive sell-off that kicked off in 2022.
And that’s not the only hint that things are looking strained. Just glance at the “Buffett Indicator,” named after investing giant Warren Buffett.
It compares the value of the stock market in relation to the size of the economy. When the stock market starts racing ahead of the Gross Domestic Product (GDP), it suggests we could be in a bubble. And this indicator recently hit 209%. That’s over 67% above the historical trend.
Vitally, we may be nearing a tipping point… because interest rates might not fall as far or as quickly as first thought.
The excitement surrounding rate cuts has been a key factor for this massive rally.
But the follow-through from stocks after the September cut has been lackluster at best.
Some of the tech stocks that drove the rally are simply running out of steam…
And if we only see one more 0.25% cut before the end of the year, that could add further weight to an already overextended rally…
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Changing Dynamics
My four decades of experience are telling me the market dynamic is changing. We’re about to enter a period of “chaos.”
As I said, I’m not expecting huge falls like we saw in 2020 or 2022… but I am expecting volatility to jump massively.
Those who don’t adjust to these new times are setting themselves up for subpar returns – potentially for years.
That’s why tomorrow I’m holding a special event called Countdown to Chaos. I’ll show you how to harness this new period of heightened volatility.
You need to have a strategy in place before the election (which could add further fuel to volatility)… and before another major market event that will follow soon after that.
This information is extremely pertinent to those approaching retirement and buy-and-hold investors. It could save you a whole lot of grief over the coming years.
So if you want to do more than tread water in the coming chaos period, I encourage you to tune in. You can register automatically here to attend the event.
Regards,
Larry Benedict
Editor, Trading With Larry Benedict