Last week I covered the zombie company cleanup — businesses built for 1% rates that can’t survive 5%. The bankruptcies that are already running 44% above average, and why this is the beginning of the wave, not the end.

A reader replied with one question: “So where does the money go when it leaves those positions?”

That’s the right question. And the historical answer — across every major cycle in the last 100 years — is always the same four categories.

The investors who asked that question early in 1972, 1988, and 2006 experienced a fundamentally different outcome from those who waited for confirmation.

Phil Anderson’s work on the 18.6-year land cycle identifies a consistent late-cycle pattern. In the final expansion phase, as land prices peak and credit conditions tighten, institutional capital quietly rotates out of high-growth sectors and into four specific categories.

Anderson calls them HALO (Heavy Assets, Low Obsolescence) stocks. Utilities. Aerospace and defence. Infrastructure. And in some cycles, energy.

These are not glamorous. They don’t make headlines. But they share one structural feature that makes them attractive when everything else starts to crack: their revenues don’t depend on the credit cycle continuing.

A utility gets paid whether the economy is expanding or contracting. A defence contractor has a government customer who doesn’t cancel because markets fall. A railroad moves physical goods regardless of what equity multiples are doing. These businesses were built around necessity, not growth.

The historical record is consistent.

In 1973, as the 18.6-year cycle turned and the credit contraction began, the S&P 500 fell 48% between January 1973 and October 1974. Utilities and defence significantly outperformed. Investors who rotated into these sectors in 1972 — 12 to 18 months before the peak — experienced a fundamentally different outcome.

In 1989, as Japan’s land cycle peaked, the Nikkei fell 63% over the following decade. The capital that moved into infrastructure and defence in the late 1980s held its ground while real estate and financial stocks were destroyed.

In 2007, as the US land cycle turned, the S&P 500 fell 57% between October 2007 and March 2009. Utilities, defence, and waste management companies dropped far less — and recovered faster.

The pattern is not a coincidence. It is a structural consequence of how the land cycle works. In the expansion phase, capital flows toward growth and leverage. In the contraction phase, capital flows toward necessity and stability. HALO stocks sit at the intersection of necessity and stability. They exist in every cycle. They perform the same way every time.

When I pulled Smart X Terminal this week, the macro readings confirmed what the cycle framework already suggested.

Asset prices are at 88 out of 100. Interest rate level at 67 out of 100 — rates have been elevated for two years. Liquidity at 60 out of 100, declining. Credit spreads at 20 — historically compressed. The market is still pricing risk as if the cycle is ongoing.

We are in Stage 4 of the 18.6-year real estate cycle — the Winner’s Curse phase. This is the final expansion period before the peak, characterised by overbidding, leverage at its maximum, and the beginning of the capital rotation we’re discussing here. This is the period when US land prices are due to start declining.

The HALO rotation doesn’t happen after the crash. It happens before it — and the investors who wait for confirmation have already missed most of the move.

The current environment makes this unusually clear. The AI sector has been the dominant growth narrative for two years. Capital has concentrated into a handful of large technology names. When cycles turn, concentrated high-multiple positions are the first to reprice. The rotation out of AI into necessity businesses is not contrarianism — it is the same structural logic that played out in 1972, 1988, and 2006.

The question isn’t whether this rotation is coming. The historical record says it always comes at this stage of the cycle. The question is whether you’re positioned before or after.

The paid section covers the specific Smart X Terminal scores for the top HALO stocks right now — which defence, infrastructure and utility names are scoring highest on the Safety and Profit pillars, which carry too much debt to rely on, and the 3 names Ace is watching most closely at this stage of the cycle.

Want the tool I use to run this screen every week?