The Great Rotation Out Of Stocks Begins As Markets Enter ‘Fourth Turning’ | David Hay
Summary
- The "Fourth Turning" Thesis: The US is entering a crisis phase characterized by the end of American exceptionalism in financial markets. This is driven by fiscal dominance, political polarization, and a shift toward a multipolar world.
- The Great Rotation: Capital is expected to flow out of US equities (which are priced for perfection/1990s surpluses) and into international markets, specifically emerging markets and commodities.
- The "Overvalued Value" Anomaly: A key distortion noted is that traditional "safe" value stocks (Walmart, Caterpillar, Deere) are now trading at higher valuation multiples than some "Mag 7" tech giants like Amazon.
- Commodities & Miners: While gold and silver have run up, the miners (GDX/GDXJ) have lagged significantly despite exploding earnings, creating a catch-up opportunity.
Trade Ideas
Hay observes that the Japanese (EWJ) and South Korean (EWY) markets are "going vertical" and look like meme stocks. While he likes international markets generally, these specific indices are technically overextended and chasing them now is dangerous. AVOID or take profits; wait for a correction. The momentum trade continues longer than rational (melt-up).
Hay notes that Chinese stocks have corrected and valuations are extremely low (KWEB average PE is ~14, cheaper than US utilities). He explicitly mentions BYD (BYDDY) as attractive. As the "American Exceptionalism" trade unwinds, capital seeks undervalued jurisdictions. China has already experienced its bear market, creating a favorable risk/reward entry compared to the frothy US market. LONG Chinese indices and specific tech/EV leaders. Geopolitical tensions or renewed regulatory crackdowns in China.
Hay explicitly names Brazil (EWZ) as one of his "favorite markets" and notes it has been a top performer in his newsletter's trading alerts. Brazil benefits from the "hard asset" rotation (commodity exporter) and low valuations relative to the US, fitting the thesis of international diversification. LONG Brazil via ETF. Currency volatility (BRL) or political instability in Brazil.
Hay points out that while gold/silver prices have soared, miner shares outstanding are dropping (investor disinterest) and prices haven't fully caught up. He specifically praises First Majestic (AG) and Dolly Varden (DOLLF). Higher metal prices will lead to an explosion in miner earnings. The disconnect between record metal prices and lagging miner equity prices creates a deep value opportunity. LONG Gold and Silver Miners (Senior and Junior). Rising input costs (energy/labor) eating into mining margins despite higher metal prices.
Hay highlights that "boring" value stocks like Walmart, Eli Lilly, Caterpillar, and Deere are trading at 30-40x earnings or high price-to-sales ratios. Investors fleeing tech volatility have crowded into these "safe" names, paradoxically turning them into the most overvalued sector of the market. They are priced for perfection in a slowing economy. SHORT or AVOID these specific "expensive value" names. Continued "flight to safety" flows keeping valuations elevated regardless of fundamentals.
Hay notes that Amazon is trading around 22x earnings, which is significantly cheaper than the "value" stocks (WMT/LLY) mentioned above. Relative value arbitrage. If one must hold US large caps, Amazon offers better growth-adjusted value than the over-crowded defensive sectors. LONG Amazon (specifically as a pair trade against Short Value). Consumer spending slowdown affecting retail margins.
David Hay
Founder, Haymaker Publications
Hay argues that long-term US Treasuries are losing reserve status and face supply issues, but short-term T-bills are a valid "safe haven." In a volatile "Fourth Turning" environment, cash safety is paramount. Short duration avoids the duration risk of long bonds while providing yield. LONG Short-Term Treasuries (Cash equivalents). Reinvestment risk if rates are cut aggressively.
Up Next
This The David Lin Report video, published March 02, 2026, features David Hay discussing EWJ, EWY, FXI, KWEB, BYDDY, EWZ, DOLLF, GDXJ, GDX, SILVER, WMT, LLY, CAT, DE, AMZN, SHV, BIL. 7 trade ideas extracted by AI with direction and confidence scoring.
Speakers: David Hay · Tickers: EWJ, EWY, FXI, KWEB, BYDDY, EWZ, DOLLF, GDXJ, GDX, SILVER, WMT, LLY, CAT, DE, AMZN, SHV, BIL