David Hay — Stocks Face A 'Vicious' Unwind; Which Sectors Win Out?

XLE is an ETF — a single fund you can buy that holds a basket of the big US energy stocks, so it moves with the whole sector. Hay's point: despite what he calls the worst energy crisis ever (a huge chunk of the world's oil stuck behind the closed Strait of Hormuz), this fund has barely moved since the war started in late February. The market is acting as if nothing is happening.

To him that disconnect is the opportunity: a sector priced for calm while the supply backdrop is the most alarming in his career. He sums up the trade as "if you want to play the tech boom, do it with energy" — because the data centers powering AI can't run without it.

UNG is a fund that tracks the US price of natural gas. This is Hay's single most bullish idea. US gas is shockingly cheap — about 90% below what gas (as "LNG," the liquefied form shipped overseas) sells for in Asia and Europe. That gap, he argues, is too big to last; sooner or later US prices get pulled up toward the world price.

Demand is also rising fast: AI data centers are powered mainly by gas, and the US is building export terminals to ship more abroad — especially now that Qatar's supply is offline. Meanwhile traders are betting against gas, which often marks a bottom. He thinks people will look back and ask "how did I not load up at these prices?"

Expand Energy is a US natural-gas producer — a way to own the gas thesis through a company rather than the commodity. Hay likes that it's cheap: about 10× its annual earnings and 1.5× its sales, which for a producer is inexpensive. The stock already broke higher and then pulled back, which he sees as a better entry.

His one-liner: "you're not overpaying," unlike so many other stocks today. If gas re-rates toward global prices, a low-cost producer like this has a lot of room to run.

Range Resources is another US natural-gas producer, and Hay calls it "dirt cheap" at about 9× earnings. Like Expand, its stock recently broke out to a multi-year high — a sign buyers are starting to notice.

The thesis is the same as the gas trade overall: cheap commodity, cheap producer, and powerful new demand from data centers and LNG exports. He thinks investors "can make a lot of money on these."

New Hope is a big Australian coal miner (US ticker NHPEF). Hay admits he's been reluctant to own coal because it's dirty, but the supply picture has changed his mind: Asia depends heavily on coal, has been cut off from gas, and Indonesia — the world's biggest coal exporter — is moving to halt exports to protect its own supply.

That points to a coal-price spike. New Hope trades at only ~14× earnings even with coal prices depressed, and he says the chart "looks like a coiled spring" — coiled tight, ready to jump if prices rise.

Nutrien is the world's largest fertilizer company. Fertilizer stocks have been dead money lately and investors are giving up — but Hay sees the same setup as energy: it takes a lot of energy (and natural gas in particular) to make fertilizer, and the Hormuz shutdown is choking supply. Short supply plus steady demand usually means higher prices.

He thinks the disappointing fertilizer names are due to wake up, and "a company like Nutrien would have a nice rally coming up."

FXI is an ETF that holds China's largest companies. China's market broke out of a long, ugly downtrend, then corrected hard — exactly the kind of beaten-up-but-still-rising setup Hay likes.

His catalyst is geopolitical: he expects an eventual Middle East resolution, and China (a huge energy importer) would benefit a lot from cheaper, more reliable oil. When sentiment turns, he thinks China is set up for "a very big bounce back," and FXI is one easy way to own it.

EMB is a fund holding government bonds of emerging-market countries, priced in US dollars. Hay prefers these to US Treasuries for two reasons: they pay much higher yields (the interest you collect), and he thinks the underlying finances are actually healthier.

The evidence he points to: over the last few years emerging-market bonds have made new price highs while bonds in the rich, developed world have made new lows. In plain terms, money has been quietly favoring EM debt — and he expects that to continue.

XLF is the ETF for the big US financial stocks (banks, insurers, etc.). Hay likes them precisely because they've lagged and "come down really hard." They had a multi-year breakout, popped, then corrected sharply — which scared people off, even though the longer trend is still pointing up.

His rule of thumb: find sectors that are in an uptrend but have just corrected, because you get a rising trend without overpaying. Financials fit that pattern right now.

IWM tracks the Russell 2000 — an index of about 2,000 small US companies, the opposite of the handful of giant tech names dominating the S&P 500. Hay's advice is to go "down in size," meaning own smaller companies to escape the crowded megacap bubble.

The data backs it up: the Russell is up about 12% this year versus 7.5% for the S&P, so the smaller stocks are already quietly winning while avoiding the most overvalued names.

EEM is a fund holding stocks across emerging markets (China, India, Brazil, Korea, etc.). Hay calls emerging-market equities "one of our favorites" — and says they have "crushed the S&P" again this year, after also beating it last year.

It fits his broader theme: step away from the over-owned, over-concentrated US megacaps and toward cheaper, faster-growing markets that have been quietly outperforming.

IJH holds mid-cap stocks — medium-sized US companies that sit between the giants and the tiny names. This is Hay's single favorite way to own US stocks right now.

The appeal is the discount: mid-caps trade at roughly 15–17× earnings, well below the lofty S&P 500, and they've been outperforming it. So you get cheaper valuations and you sidestep the bubble megacaps — "if you want to be in the US market, I think that's a pretty good one to overweight."

GLD is the big gold ETF — owning it is essentially owning gold. Hay is structurally bullish over the long run because of who's buying: central banks. He argues US Treasuries have become a "tarnished reserve asset" — once the safe place central banks parked their reserves, now less trusted (Japan and China have been sellers) — so they're shifting toward gold instead. That's a big, durable source of demand.

But near-term he's cautious: he "wouldn't say gold has hit bottom" yet after its pullback. So the long-term story is good, but he isn't calling the low — hence neutral for now.

SLV is the big silver ETF. Hay had been very bullish on silver in 2024–25, then called the top when it blew past $100, and it got crushed. Now back in the upper $60s, he thinks that's roughly the "wash-out" level — where panic selling exhausts itself and value appears.

Silver has real demand drivers (it's used in AI data centers and consumed every time a missile is launched) and sentiment is very negative, which can be bullish. But because he correctly flagged the earlier blow-off top, he stays cautious rather than aggressively bullish — a neutral, value-leaning stance.

TLT holds long-dated US government bonds (20+ years). Their prices are very sensitive to interest-rate moves — that sensitivity is called "duration," and long bonds have a lot of it, so they swing hard. With the 30-year yield around 5%, Hay sees a tactical trade: if stocks sell off, scared money rushes into these bonds and their price jumps.

But he's clear it's only a trade — "those rallies are to be sold." He won't hold long bonds for years because future government deficits mean a flood of new bond supply, which pushes prices down. He prefers shorter-term treasuries, where you roughly keep up with inflation and keep your flexibility.

Nvidia is the dominant AI-chip maker. In a conversation where Hay is bearish on most of the megacap "bubble," Nvidia is the one he'll defend: he says it's "not a high multiple stock," meaning its price isn't crazy relative to its earnings — unlike the truly speculative names.

The catch is the condition he attaches: "sales better keep coming through." The valuation only holds if Nvidia's revenue keeps growing fast; if AI spending slows, the story changes. So he's constructive but conditional — neutral, not a ringing buy.

SPY is the fund that tracks the S&P 500 — the broad US market. Hay calls today's market "bubble 4.0": about half of it is now tech (and "stealth tech"), making it dangerously concentrated. "Breadth" — how many stocks are actually participating — is terrible: only about 5% of S&P companies were hitting new highs even as the index did. A market carried by a handful of names is fragile.

He also notes the VIX (the market's "fear gauge") was rising even as stocks rose, an odd warning sign, plus a coming flood of mega-IPO stock supply. When such narrow, crowded markets crack, he warns, the unwind is "vicious."

EWY tracks South Korea's stock market, which is up more than 90% this year. The problem is that the gain is basically two stocks — Samsung and SK Hynix (memory-chip makers riding the AI boom). When an entire market is really just a couple of names, it's extremely fragile.

Hay's firm did well owning Korea but put out one of its "rare sells" earlier this year, and he still thinks the market "gets clocked." It's his prime example of how dangerous narrow, concentrated leadership is — the same disease he sees in the US.

Bitcoin is the largest cryptocurrency. On the June-5 sell-off Hay notes it's now down more than 50% and "getting slaughtered." His read is that markets are going through a sudden "global deleveraging" — when too many investors have borrowed to buy risky things, a wave of forced selling hits everything at once, and the most speculative, most leveraged assets (like crypto) get hit hardest.

So this isn't a deep view on the technology — it's that crypto is the front line of a broad, panicky unwind, and he expects more pain.

SpaceX is Elon Musk's private rocket company, one of the giant IPOs expected this summer. Hay's worry is the price: a reported ~100× earnings, which he calls "ridiculous." And when you buy a hyped IPO, you're often "exit liquidity for the VCs" — the early venture-capital backers are selling their shares to you and cashing out, so you're late, not early.

He adds that "space stocks" are probably a decade or more away from meaningful profits. Combined with the ~$4.5T wave of IPO stock about to hit the market — far more than all US IPOs in history combined — he sees these as a major source of downside risk.