Larry Williams’ Cycle Work: The Markets Are Still Good

Larry Williams made his annual video about how he sees 2026.

Larry is almost 83 years old and quite interested in the markets. These videos he made show us how the markets could develop on a longer term trend. From what I understand, Larry’s trading time frame is much shorter, but his cycle work is some of the best.

I was quite taken by one of his annual reviews of a year where, if we look at the inflation cycle and gold, gold actually didn’t do that well when inflation is rising and only did better when inflation is falling.

This is something I haven’t seen mentioned much by others.

If you believe that different things have cycles and seasonality, it seems like Larry Williams has a lot of experience with cycling.

I tend to think that:

1. Cycle changes often do not exactly coincide with the data/market changes.
2. The magnitude of new trends can be mild to more significant, and cycles usually don’t show it very well.
3. Markets tend to rise even when there are cycle contrasts.
4. Larry often commented that bicycles work best on the bottom.

These are some things to keep in mind about my comments below.

Based on the cycle charts of the data I see, many of the positive turns are happening after mid-2026, so we may have more turbulence in the first half of 2026. Please let me know if you observe the same.

Larry Williams’ 2026 Market Forecast: Cycles, Risks and Opportunities

Short prediction from Larry Williams for 2026:

1. Stocks will move higher
2. Interest rates will fall
3. Inflation will increase

I find that many of the cycles and timing are quite similar to another data focus team at 3Fourteen Research. Warren Pies of 3Fourteen (now you may notice why they call their company that name) recently created a podcast with Forward Guidance:

Here are the notes.

Larry reminds us how many people are calling for a recession in 2022/2023.

Robert Kiyosaki, Jim Rogers, Ray Dalio, Jeremy Grantham, George Gammon, Jim Rickards and CEO of Fedex predicted a recession in 2022/2023. All still waiting.

Larry might say they need better data or that getting the timing right is a huge challenge.

How to interpret the yield curve

A lot of the predictions about a recession and of course a bear market have to do with the way the yield curve inversion precedes the entire recession.

Yet we had that reversal, but no recession.

Larry notes that unless the 10 year old minus the 2 year old is above 1then we should be concerned. we’re still not there.

Interestingly enough, 3Fourteen’s Warren Pies mentioned something similar in the Forward Guidance video.

Falling returns and bear market

Larry takes us to the historic market crashes of the past and how the dynamic yield curve on StockCharts.com shows up. They’re all going down, while right now… the dynamic yield curve is going up.

Inflation cycle: ready to go back up

Larry thinks inflation is good up to a point and bad up to a point.

Morgan Stanley’s Mike Wilson reminds us that they did factor in some inflation in their EPS growth estimate and that if there was no inflation, EPS growth should be lower. I hope I remember that this is about earnings per share growth and not a price estimate.

Employment and Dow Jones Industrial Average Cycle

When employment increases, the Dow Jones Average generally rises (1971, 1982, 1993, 2004, 2015).

Cycle work will decrease from early 2025 to mid-2026, after which employment will pick up.

Edgar Lawrence Smith cycle from 1930

Larry discusses how Warren Buffett was influenced by Edgar Lawrence Smith’s research on stocks outperforming bonds. I’m not sure how true that is.

Edgar also did some bicycle work with markets dating back to the 1930s.

The cycle low was in (end 1994, 1998, 2002, 2005, 2008, end 2012, 2016, 2019, 2023). The next one is like July-September 2026. This one is fucking rough.

Year ending in ‘6’

If we have three years in a row of positive years, what happens?

M2 Money supply cycle work

The M2 is a measure of the money supply that reflects how much liquidity is available in the economy. (M2: cash, checks, savings deposits, small time deposits, retail money market funds. Money that can be spent or invested fairly quickly)

We’re looking at it because we think liquidity leads to asset price growth, which has to do with a whole host of things.

Larry shows us that there may be cycle patterns in liquidity.

That means we can tie the work of the money supply cycle to the Dow Jones Industrial Average.

I’ll let you all interpret whether lack of liquidity == falling market.

I think when liquidity is rough, some cases end in a bear market, but two cases end in smaller market corrections.

We’re at the start of 2026 and have a feeling the first half is going to be tough.

The right way to use sentiment research

The University of Michigan Consumer Sentiment Survey is a widely watched gauge of household confidence in the economy, and market participants use it as a leading indicator of consumption and macro momentum.

It is a monthly survey of American households conducted by the University of Michigan that measures:

1. How consumers feel about current economic conditions
2. Their expectations for income, jobs, inflation and business conditions

Larry’s notes that sentiment typically follows the market rather than leading the market:

Larry notes that the real buying signals happen when the University of Michigan Sentiment Survey drops below 60%.

This year the survey dropped below 60% and now it is still below 60%.

Business Tendency Survey (BTS) Cycle Work

The Business Tendency Surveys (BTS) – US National Indicator is a composite measure of business confidence designed to capture how companies view current conditions and near-term prospects across the economy.

It is built on business responses:

• Production/output
• New orders
• Employment intentions
• Stocks
• Occupancy rate
• Business expectations

So the BTS is quite useful alongside other data on the production of services and goods, such as ISM PMI and NFIB Small Business Optimism.

I think Larry wants us to focus on whether there are supportive business conditions that would stimulate the market. This supportive cycle looks set to end in 2026.

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