Prepare For A Volatile Second Half Of The Year

To investors,

Many financial assets are trading sideways as we enter the summer months. This can cause investors to question whether certain investment ideas have been disproven and/or should be shut down.

Humans are really bad at being bored.

But Charlie Munger said it best when he stated, “the big money is not in the buying and the selling but in the waiting.” To those who can survive these sideways months are likely to have relief on the way in the second half of the year.

Bank of America’s research team recently put out a report showing a 25% increase in volatility from July to November of election years. You can expect movement in the second half of this year.

This level of volatility would be a welcomed change from the current boredom. During the boredom, some asset prices like bitcoin have traded slightly down. Some have traded flat. And others, like the S&P 500, continue to grind higher at a slow pace.

For example, the 500 largest companies in the US have not seen a draw-down of at least 2.05% in more than 375 days, which marks the longest such stretch since the Great Financial Crisis.

And we know that many new all-time highs packed into the first 6 months of the year usually leads to a monster year for the stock market. Momentum is a hell of a drug. Already this year, we have seen 30 new all-time highs in the S&P, which suggests the second half of the year should be volatile and fun.

And bitcoin seems to have some positive data, although the asset has traded off its all-time high a few weeks ago. Checkmate, one of the leading on-chain analysts, points out how weak the bitcoin drawdowns have been in this bull market.

So what is my take? Volatility in the stock market should be expected for the second half of the year, but bitcoin appears to be losing the asymmetric volatility in both directions. The asset doesn’t drawdown as much as it used to and my expectation is the asset won’t have the parabolic bull markets that we have grown accustomed to.

Bitcoin is growing up. The price will grind up over time. There are new market participants here. This is the next step of mass adoption.

Just don’t pigeon hole yourself into only investing in one asset. Volatility can show up in different places at different times. Make sure you are prepared to capitalize on it.

Hope you have a great day. I’ll talk to everyone tomorrow.

-Anthony Pompliano

Nic Carter is the Co-Founder and General Partner at Castle Island Ventures.

In this conversation, we talk about bitcoin, artificial intelligence, energy consumption, regulation, politics, Trump vs Biden stance on crypto, stablecoins, impact of ETH ETF, and future outlook on the industry.

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My Conversation with Castle Island’s Nic Carter

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