Roundtable 2023: A 2024 Recession Won’t Stop Us

By TradeSmith Research Team

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Roundtable 2023: A 2024 Recession Won’t Stop Us

Michael Salvatore, Editor, TradeSmith Daily: Hey, William, thanks for taking the time to chat today. I know you’re busy – between expecting your first child, traveling throughout Thailand, and of course, managing Trade Cycles by TradeSmith for your subscribers. So, I appreciate you setting a few minutes aside to catch up.

2023 was one heck of a year, right? Full of high points and low points.

How do you feel about your performance in 2023 with Trade Cycles?

William McCanless, Editor, Trade Cycles: So, we absolutely killed it in 2023 with Trade Cycles.

We called the top of the market around July, using seasonal data. We then managed to short every drop and long every bounce until late October.

At that time, while the broader index was down around 10%, we were up 5%.

Then, when we had that extraordinary rally starting about October 27, we got long a lot of stocks… and as of now, we’ve beat the index this year. So, it was really good.

Michael: Yeah, that’s fantastic! A huge year for Trade Cycles subscribers.

So, let’s look ahead. Tell me about your outlook for 2024. I understand it’s not as optimistic as most others seem to see it.

William: Without a doubt, I’m convinced we’ll see a recession in 2024. I can’t say nobody’s talking about this, but a lot of people don’t seem to believe it at this point.

One main reason why is the yield curve inversion, which I know you’ve been writing about recently. This is when short-term Treasury bills are paying out more than long-term bonds.

It’s close to its deepest inversion level ever, and falling. And every time this has happened in history, a recession followed.

[Here’s a chart of the 10-year minus the 3-month Treasury yield, one measure of the yield curve. It’s at the deepest level of inversion since earlier this year.]
And if the Fed cuts rates even temporarily during that recession, I’m looking for stocks to drop, not rise.

For some reason, a lot of people think that stocks will rise when the Fed cuts rates, but historically stocks stage a ginormous bear market when the Fed cuts. That’s pretty much when the crash happens.

[Here’s a table William recently shared with his subscribers, showing stock performance after the Fed cuts rates amid previous recessions.]
It’s also an election year, so we have a lot to look at there from a seasonality perspective. Typically in election years, starting about the middle of January until the end of May, we see a gigantic bearish period.

And counterintuitively, there’s the mantra of “sell in May and go away.” The idea is you should sell in May and come back around the end of October.

But in election years, that’s completely topsy-turvy. The fact of the matter is that stocks tend to do very, very poorly until the end of May and do very, very well into about the beginning of September.

So, I’m looking at strong odds of recession, number one. And two, we’ll likely see rate cuts.

But my take is that won’t be a buy signal, but a sell signal.

Unfortunately, you’re going to see a lot of people buying in at the very tippy, tippy top of the indexes.

All the folks who sat on the sidelines starting around October 2022, who finally gave up and said, “I’m done. I can’t sit on the sidelines anymore …” They’ll jump all the way in at the end of this year and the beginning of 2024, and then get screwed as the institutions will probably sell.

So that’s my initial view of the next year.

Michael: Definitely something to be cautious of.

Let’s zoom in a bit. What sectors, stocks, or other assets do you think will do well next year?

William: So, the answer to that is simple…

I’m just not a “hot stock pick” kind of guy. Every stock that I trade is, to me, nothing but a ticker.

I don’t care what the company does. I don’t care who the CEO is. I don’t care about the fundamentals at all.

All I care about is what the price is doing.

My question, with any trade, is this: Are people probably going to buy this over the next two weeks to three months? Or are they going to sell it over the next two weeks to three months?

That’s the only question I need to answer. I wouldn’t be caught dead looking at a balance sheet. Not that there’s anything wrong with that at all… It’s just not how I make money.

As far as what I would recommend for the long term, and what I do with my own money, it’s the simplest technique in the world.

Dollar cost averaging. I continually buy indexes, Bitcoin, and gold over time. Come rain or shine. And that’s it. I lock it up, throw away the key, and forget it exists. And that’s what I recommend most people do outside of their active trading accounts.

I’m afraid that means I don’t have a top stock for 2024, but what I can promise is this…

I have a hot strategy for 2024, and it’s to trade the chart in front of me. To look to history as a guide. To use the Trade Cycles indicator to give us an edge nobody else has. And to use the seasonality indicators that have steered us so right in 2023, and that I believe will continue to next year.

Michael: Well said.

So I imagine you have a similar answer to my next question… which is, what should folks avoid next year?

William: Right, I’m not a stock picker in the sense of “here’s what stocks you should buy,” “here’s what you should avoid.”

I’m a trader. That’s what I do exclusively in Trade Cycles. So I have a different view on this.

Rather than telling you to avoid one thing or another, I’ll say it’s more important to avoid a certain tendency among traders.

Don’t fall victim to fear of missing out, or FOMO. Do not chase prices, do not chase trends, do not chase hype.

If you miss an initial move, it’s better to just accept that and move on to the next opportunity.

There are going to be other assets, other stocks that are down and poised to move up over the next 12 to 24 months that you can get into in preparation.

Look for stocks that everyone hates, assets that everyone hates that are so oversold, that are so ridiculously beaten down, and where the macro environment is increasing in their favor and get in on those.

Use the TradeSmith tools, listen to the analysts at TradeSmith, and take action accordingly.

And to help you avoid FOMO once those prices take off, you need to ask yourself a fundamental question.

Why is this trade on my radar now and it wasn’t on my radar earlier?

You have to take a hard look at how you find opportunities. How do you filter the market out, the noise out, to put these opportunities on your radar way earlier?

I strongly recommend using the TradeSmith toolkit and following our research closely to get a leg up on these trades before they hit the headlines.

Michael: Last question, an exclusive one for our Platinum members…

What is your top pick for 2024?

William: Bitcoin. That’s it. From a pure investment perspective, I don’t care about anything other than Bitcoin in 2024.

The reason why is 2024 is the next halving. That’s when the incoming supply of Bitcoin earned by miners is cut in half.

I bought in at $10,000 in 2020, the year of the last halving, and saw it rise to $69,000. And the same thing happened in 2016… and the same thing happened in 2012.

This time around, I think we’ll see Bitcoin go to about $200,000 to $250,000 before the mania dries out.

2024 is going to be all about Bitcoin. That’s really the big thing. I’m pretty sure crypto is going to dominate the news at that point, especially with the Bitcoin ETFs happening.

So, Bitcoin’s going to be the news for 2024. That’s what it’s going to be all about.

That’s not to say some stocks won’t rise, too. But the spotlight is going to be on Bitcoin next year, and that is going to soar astronomically.

Michael: Very cool, and I’m right there with you. I’ve been buying a lot of Bitcoin, and I’m looking forward to seeing what happens next year.

This has been great, William, thanks so much for taking the time to chat with me today.

William: My pleasure, Michael, thank you for having me.