Stock Market More Dangerous Than Right Before The 1929 Crash | David Hay
Valuations are *really* stretched here
One of the great David Bowie's most popular songs was titled "Changes".
Today's guest David Hay, Chief Investment Officer & Principal at Evergreen Gavekal, might well steal that title for his expected theme of 2025.
He sees headwinds that could cause the economy to grow slower than many currently expect.
He sees the prices of stocks and bonds at risk, the Fed increasingly behind the curve, the dollar potentially reversing, and lots of uncertainty to soon ensue as the Trump Administration starts to deploy its disruptive policies.
In today’s interview, he walks us through charts of all that and more.
To watch it, click here or on the video below.
(FYI: David’s full chart deck is provided for premium Substack subscribers at the bottom of this email)
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Adam’s Notes: David Hay (recorded 1.16.25)
EXECUTIVE SUMMARY:
Liquidity trends have become the dominant force influencing market direction. David highlighted that understanding liquidity flows is more critical than valuation or sentiment for near-term market predictions. Analysts like Michael Howell project that global liquidity will peak at the end of 2025, followed by a contraction. This shift could exacerbate market volatility and lead to a disappointing 2025 for asset performance. Liquidity measures, while essential, remain underreported and misunderstood by retail investors.
U.S. corporations face a significant challenge in 2025 as a wave of bonds issued during the low-interest rate era begins maturing. These companies will be forced to refinance at rates significantly higher than the near-zero levels seen a few years ago. This refinancing burden could erode profit margins, increase default risks, and create instability in the corporate bond market. A key visual highlighted in the presentation showed how shorter-term corporate debt cycles intensify this risk.
The interplay between fiscal and monetary policy continues to create economic distortions. While the Federal Reserve raised rates aggressively, fiscal policies, such as large government deficits and stimulus measures, added liquidity to the system. David emphasized that during 2022–2023, fiscal expansion overshadowed monetary tightening. The Fed’s attempts to drain liquidity were counteracted by federal spending, a phenomenon that risks
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