The Market Is In A Topping Process | Cem Karsan

**Cem Karsan** (0:00)
It is my view that we are in a broad topping process here. I think valuations reiterate that. I think there's all kinds of reasons to believe that even though it is very hard to call to the week, to the month, the quarter, or even sometimes the year, we are getting very close to another kind of move down that is going to, when you zoom out over a decade, going to look like a lot of chop back and forth.

**Adam Taggart** (0:31)
Welcome to Thoughtful Money. I'm its founder and your host, Adam Taggart. Today's guest is the perfect expert to discuss a year as volatile as 2025 has been. Cem Karsan is founder, chief investment officer and managing principal of Kai Volatility Advisors & Kai Wealth. He's widely known as Cem Kossant on ex-Twitter. Heading into 2025, Cem warned us that he predicted it would be a year of heightened volatility, and that certainly proved true in the first half of the year, and again, in recent weeks. But what about the road ahead? Are we through the worst of the bumps, twists, and turns that the market will throw at us, or will the ride remain rocky in 2026? Let's hear straight from the man himself. Cem, thanks so much for joining us today.

**Cem Karsan** (1:16)
Good being back, Adam. Good to see you.

**Adam Taggart** (1:18)
Thank you. Great to see you. First off, let me just reiterate the props, because I remember interviewing you going into 2025, and you said, hey, folks, I think this is going to be a more volatile year than the past couple of ones, and that certainly proved true in spade just a couple of months later with the whole April Swoon and the Liberation Day freak out and all that stuff. It did get less volatile as the markets just took an escalator higher for much of the rest of the year, but then starting about a month ago or so, it started getting bumpy again.
Where are we in the volatility story here? Have we seen the worst of it? Did we get it out of our system? Or is 2026 looking like it's going to be a repeat of 25 from a volatility standpoint?

**Cem Karsan** (2:03)
Yeah. So if we back up four or five years ago, I was very clear we were entering at 15 plus year, 15 to 20 year period that looks very different than the last 40 years. Not to start like so high off the ground.

**Adam Taggart** (2:19)
It's very helpful. So yeah, please do the refresher.

**Cem Karsan** (2:22)
But it's so important to understand that we are not in Kansas anymore. This is not the same environment of a Fed dominated, globalization increasing tech, low interest rate environment, right? It is a tech driven world.
Now, some of those things are still with us, but I've been very clear that the way we're likely to move forward here, which in my opinion, and I've been very clear about this, is driven primarily by a demographic and populist kind of impulse. Even though it will be through many quarters and years of counter trend, things along the way are largely going to be a period of rising interest rates, of increasing inefficiency, deglobalization, increasing global conflict, a period of likely towards the end, slowing antitrust and slowing corporate earnings growth. That sounds really scary and it's not going to happen overnight. This is a big process. But again, we started really talking about this in 2021, and again, correctly called at 22, almost to the week, the beginning of the decline there. The view is that in nominal terms, we're likely going to have a lost decade to 15 years in equity markets, and in real terms, likely real meaningful losses to a portfolio. And the way you invest in that environment is dramatically different than how you invest in an environment where interest rates are decreasing, I apologize, secularly, and globalization is increasing and all the things that come from the regime. I'd like to say that if you got the broad picture right, that interest rates were going top left to bottom right for 40 years, you would have gotten very clearly a tremendous amount of profits over 40 years. That one understanding was incredibly important. You would have been invested in growth. You would have bought the dips. You would have stayed very long beta. You would have been focused on real upside convexity for 40 years, and you would have been incredibly wealthy. A lot of people got that, whether either lucky or otherwise.

**Adam Taggart** (5:03)
I was going to say, it sounds like a lot of boomers.