U.S. Stocks are at 1929-Level Extremes | The Hard Asset Hedge | Adrian Day
Speakers
Adrian Day
— President, Adrian Day Asset Management
Summary
Adrian Day argues US stocks are extremely overvalued, rivaling 1929, and expects a multi-year outperformance of foreign markets. He is underweight US equities and favors value stocks, BDCs like Ares Capital, and world ex-US stocks. He highlights signs of speculation and rising oil costs pressuring corporate profits.
- US stock market at most extreme valuation levels since 1929.
- Signs of speculation: margin debt, one-day options, leveraged ETFs.
- Magnificent Seven leaders appearing to roll over.
- Expects rotation into value stocks.
- Predicts multi-year outperformance of foreign markets over US.
- Adrian Day is meaningfully underweight US stocks.
- Likes Ares Capital (ARCC) for its diversification and dividend coverage.
- Bought depressed consumer stocks on profit warnings but now reducing.
Trade Ideas
US stocks extremely overvalued, avoid.
The US stock market is at extreme valuation levels on most metrics in history, rivaling 1929, with poor risk-reward due to excessive speculation and rising oil costs pressuring corporate profits. The speaker is meaningfully underweight US equities.
Magnificent Seven rolling over, avoid.
The Magnificent Seven and other US big tech leaders appear to be rolling over, indicating that the market leadership is losing steam. This suggests further downside risk for these stocks.
Rotation into value stocks expected.
Value has underperformed growth for five years at extreme levels, and a multi-year rotation into value is likely as money rotates out of overvalued growth stocks. Value stocks should outperform.
Multi-year foreign market outperformance.
Foreign markets (World ex-US) have dramatically outperformed the US last year and continue to do so in 2025. The US vs world ratio remains near 50-year extremes, and historical patterns suggest a multi-year period of foreign outperformance ahead.
Ares Capital is a good buy.
Ares Capital (ARCC) is the largest and one of the most conservative BDCs, extremely diversified (no loan >2% of portfolio), earning its dividend well, and has ample cash reserves. The stock has corrected but remains a good buy with a covered dividend.
