Raoul Pal's Insights On Business Cycle Impact On Asset Classes, Including Blue Chip Cryptos Over Certain Altcoins

BY Benzinga | ECONOMIC | 11/29/23 12:14 PM EST

Former Goldman Sachs executive Raoul Pal shared insights about the business cycle's impact on various asset classes, including cryptocurrencies, emphasizing the risks associated with trading altcoins outside the top 10.

In a series of tweets, Pal presented "Raoul's Easy Guide to the Business Cycle," outlining the relationship between the ISM Index and GDP growth.

He noted the current ISM levels suggest low GDP growth for the fourth quarter and first quarter, affecting cyclical stocks, the Russell 2000 (RTY), and commodities.

Looking ahead, Pal's lead indicator for ISM has been rising sharply, which typically benefits the S&P 500 (SPX), a mix of cyclical and growth stocks.

This rise explained the SPX's strength compared to RTY or commodities.

Further into the future, using the GMI Financial Conditions Index, Pal predicted a strong year in 2024.

Growth assets like the NASDAQ (NDX) and cryptocurrencies, which tend to bottom out earlier in the cycle, are poised for recovery.

Extending his analysis to the end of 2025 using the "Everything Code" framework, Pal foresaw good economic growth on the upside of the business cycle.

He highlighted that global liquidity, a crucial factor in this framework, was expected to rise, driving asset growth.

Pal emphasized the importance of investing in "the fastest horses" or the secular trending assets during these times. He identified technology, specifically the Exponential Age and cryptocurrency, referred to as the "Super Massive Black Hole," as key areas of focus.

Also Read: Analyst Predicts This Altcoin Set To Outshine Bitcoin

He noted crypto tended to outperform tech as the liquidity cycle turned positive.

However, Pal issued a caution regarding altcoins.

While altcoins begin to outperform Bitcoin (CRYPTO: BTC) for the remainder of the cycle, he warned trading altcoins outside the top 10 is challenging and carries significant risk.

He suggested that investors can achieve the most gains by holding onto established cryptocurrencies such as Bitcoin, Ethereum (CRYPTO: ETH), and potentially Solana (CRYPTO: SOL) or other proven projects with adoption.

Read Next: Look Out For A 'Rage Pump,' Analyst Says: Pepe's Risk-Reward Ratio Remains Favorable

Photo: Shutterstock

In general the bond market is volatile, and fixed income securities carry interest rate risk. (As interest rates rise, bond prices usually fall, and vice versa. This effect is usually more pronounced for longer-term securities.) Fixed income securities also carry inflation risk and credit and default risks for both issuers and counterparties. Unlike individual bonds, most bond funds do not have a maturity date, so avoiding losses caused by price volatility by holding them until maturity is not possible.

Lower-quality debt securities generally offer higher yields, but also involve greater risk of default or price changes due to potential changes in the credit quality of the issuer. Any fixed income security sold or redeemed prior to maturity may be subject to loss.

Before investing, consider the funds' investment objectives, risks, charges, and expenses. Contact Fidelity for a prospectus or, if available, a summary prospectus containing this information. Read it carefully.