Fund Manager Predicts Market Action After Trump Inauguration | Thomas Hayes
Speakers
Thomas Hayes
— Co-founder, Crypto Is Macro
David Lin
— Founder & Host, The David Lin Report / ex-Anchor, Kitco News
Summary
Thomas Hayes, Managing Member of Great Hill Capital, reviews recent market volatility, rising yields, and positioning ahead of Trump's inauguration. He favors value over growth, small caps, international equities, healthcare, and materials, while expecting Mag 7 and AI-chip leadership to cool. He details energy exposure via Comstock Resources, potential oil-services expansion, and specific tech views on Apple, Nvidia, Intel, and Taiwan Semiconductor. He also predicts 10-year Treasury yields drift toward 4% rather than 5%.
- Market pullback is tied to rising 10-year yields, Fed cut repricing, and tariff uncertainty.
- Hayes expects market broadening to resume and favors value, small caps, and international over growth and Mag 7.
- Healthcare and materials are favored as beaten-down sectors with expected 2025 earnings acceleration.
- Energy exposure is centered on Comstock Resources, with oil services as a potential expansion area.
- He warns Mag 7 and Nvidia face multiple compression from slower AI capex, inference shift, and competition.
- Intel is framed as an asymmetric margin-of-safety idea, while TSMC is seen as best-positioned foundry.
- He expects bonds to rally and 10-year yields to move closer to 4% than 5%.
- Export controls are viewed as a long-term negative for US semiconductors by fostering Chinese competition.
Ideas
S&P 493 benefits from broadening rotation.
If indices pull back, it would likely reflect Mag 7 weights getting hit. He expects to make money in the other 493 S&P 500 stocks and international, which should be less impacted by an overall market liquidation and benefit as the broadening rotation resumes.
Comstock trades below reserve value.
He has exposure to Comstock Resources, where Jerry Jones owns about 66% of the stock. His cost basis is around $7-8 per share versus a current price around $20, and he sees intrinsic value supported by proved reserve PV10 of $20-30 per share plus another $20 of unproved value, so he is not worried about daily natural gas or oil moves.
Integrated oil lacks sufficient asymmetry.
He does not find sufficient risk/reward or asymmetry in the integrated oil and gas space despite low P/E multiples, high dividends, and buybacks, because he seeks a 30%+ IRR over a few years. His energy exposure remains limited outside Comstock Resources.
Oil servicers benefit from higher drilling.
If he expands energy exposure beyond Comstock Resources, he would look at oil servicers, potentially Schlumberger, to take advantage of increased drilling and favorable energy policies from the Trump administration. He has no current position there but this is where he would look.
Mag 7 faces multiple compression, carry unwind.
Mag 7 earnings growth is decelerating from 33% to roughly 18-21% while the multiple remains near 33x and has not derated. They are crowded beneficiaries of the yen carry trade, vulnerable to an unwind if the BOJ raises rates and JGB yields blow out, so he expects low-to-high single-digit returns and underperformance versus value rather than an active short.
Small caps: better growth, cheaper multiples.
Small-cap 600 earnings growth is expected to rise from 8% to 21% while the index trades at 16x, half the Mag 7 multiple for similar or better growth. The Russell 2000 could see earnings growth around 50% as unprofitable companies turn profitable, and small over large worked in Trump 1.0.
Healthcare offers value with accelerating earnings.
Healthcare was among the worst-performing sectors last year because of poor earnings growth, but earnings are expected to grow 20.4% this year, meaningfully above the S&P's 14-15%. He likes it as a beaten-down value sector with major earnings acceleration.
Materials rebound on accelerating earnings growth.
Materials was also among the worst-performing sectors last year, but earnings are expected to grow 17.4% this year. He likes it as another beaten-down value sector with expected earnings acceleration.
International equities: similar growth, lower multiples.
International ex-US equities are expected to grow earnings 13-14%, close to US growth near 14%, but the US trades at 22x versus 15-15.5x internationally. That is similar growth for about a 30% lower multiple; after Trump 1.0 the dollar rolled over and international and emerging markets outperformed, so he wants international exposure.
Apple's multiple expansion looks unsustainable.
Apple historically traded at about 14x when it had high earnings growth, but growth has decelerated to low-to-mid single digits while the multiple expanded into the 20s. The bull case relies on services revenue and profitability, but decelerating earnings plus multiple expansion is a bad formula, and he expects gains to consolidate.
Nvidia at risk from capex and competition.
Nvidia trades around 30x sales and 40-50x earnings, but Mag 7 AI capex is set to decelerate as investors demand return on invested capital. Once models are trained, the inference phase requires less hardware, and competition from AMD, Marvell, Broadcom, and China should catch up. Chips are commoditized, so margins compress and multiples normalize; he is not saying short tech but expects a breather.
TSMC holds critical foundry position.
Taiwan Semiconductor is in the best competitive position because Nvidia can design chips but cannot produce them without advanced foundry capacity. If semiconductor production ceases to exist, Nvidia has no business, so the foundry role gives Taiwan/TSMC a critical advantage.
Intel offers asymmetric margin-of-safety bet.
Intel offers an interesting margin-of-safety opportunity. Even if investors do not believe in its fab future, the legacy business could support a double; if it announces a credible CEO and finishes Gelsinger's plan, it could be a multibagger. The US has invested $8 billion, and liquidation value would return money plus a few dollars.
Export controls invite Chinese semiconductor competition.
The new AI chip export rules hurt the semiconductor industry short term and could destroy it long term by turning China from a paying customer into a forced competitor. China will reverse engineer the technology and hire top talent, while restrictions only provide a temporary win and ultimately encourage China to become a self-sufficient competitor rather than a dependent customer.
Value outperforms growth as rates normalize.
Value stocks have outperformed growth by 4.4% per year since 1927. Growth's post-2010 dominance coincided with zero interest rate policy; if rates normalize, as he expects, investors should skew toward value and reduce growth exposure because recency bias has made growth crowded.
Value outperforms growth as rates normalize.
Value stocks have outperformed growth by 4.4% per year since 1927. Growth's post-2010 dominance coincided with zero interest rate policy; if rates normalize, as he expects, investors should skew toward value and reduce growth exposure because recency bias has made growth crowded.
Ten-year yields compress toward 4%.
He expects bonds to get bid after the inauguration and into the first quarter, with 10-year Treasury yields compressing. He takes the under on the 5% yield debate and expects the 10-year yield to be closer to 4% than 5% by year-end.
Up Next
This The David Lin Report video, published January 16, 2025, features Thomas Hayes discussing S&P 500 ex-Magnificent 7, CRK, XLE, OIH, SLB, MAGS, IJR, IWM, XLV, XLB, International stocks, EEM, AAPL, NVDA, TSM, INTC, SMH, Value stocks, IWF, TLT. 17 trade ideas extracted by AI with direction and confidence scoring.
Speakers: Thomas Hayes · Tickers: S&P 500 ex-Magnificent 7, CRK, XLE, OIH, SLB, MAGS, IJR, IWM, XLV, XLB, International stocks, EEM, AAPL, NVDA, TSM, INTC, SMH, Value stocks, IWF, TLT