Is A Recession Inevitable Now? | David Hay

**Adam Taggart** (0:01)
All right, and we should be live. Welcome to Thoughtful Money. I'm Thoughtful Money Founder and your host, Adam Taggart. I'm here for a special live stream interview. Very quickly, folks, talking to anybody in Wall Street right now, I'll tell you, it feels to them like the world just got turned on its head. The once bulletproof market rally that we had over the past two years has shifted into reverse over the past month and a half or so, with stocks falling for weeks to oversold levels in the short term. And just when traders thought that a bounce was due, President Trump's Liberation Day tariffs sent the markets plunging by percentages not seen since the worst of the COVID levels. So what we're here to talk about today is what is going on and what's most likely to happen from here. We're very fortunate to be joined for this discussion by David Hay, the up until recently Chief Investment Officer and Principal at Evergreen Gavekal. He's just days into his retirement from that role, which means that he's free to be a lot more detailed and specific with us, and his answers because he's no longer subject to compliance constraints. So I can't wait to hear his thoughts. Let me pull him in here. David, it's such a pleasure to see you. Thanks so much for joining us today.

**David Hay** (1:16)
Great to be back, Adam. Last time we talked was January 16th. It seems like that was a lifetime ago.

**Adam Taggart** (1:20)
It seems like that was a lifetime ago. It seems like a week was a lifetime ago. To be honest at this point.

**David Hay** (1:27)
As Aladdin said, sometimes there's a week when decades happen. That's kind of how last week felt. It is.

**Adam Taggart** (1:33)
And of course, it's still ongoing. So we may have another decade unfold over the course of this week. Look, a lot of questions here, a lot of ground to cover. If I can, maybe let me just start with a question I just mentioned there in the intro. What the heck is going on, David, when you expect to happen from here?

**David Hay** (1:54)
Well, I guess when you usually start these, you say, give us an assessment of the global economy and financial markets. You asked me that last time when I said precarious, which I think turned out to be pretty accurate. I would say now it's just chaos. And markets don't like chaos. I think one of the things that's been quite surprising is that prior to this utter chaos we had a tremendous amount of uncertainty. And markets really don't like uncertainty for obvious reasons. And yet it just kept whistling past the graveyard up until February 19th. And then the bottom fell out. And so I think we really had here lately, when I haven't heard this term used, is that I think we've had a crash at. You know, it's not an October 87 crash, which I remember vividly. I was in the business, I don't know, eight years at that point, something like that. But we were down 15% in two, in about an eighth trading sessions, or 12th, I guess. But so what would it be? Thirteen and a half hours, the market trading hours, the market went down 15%.
That's a lot. I went back and looked at how many times has the market gone down 5% in two consecutive days. And since World War II, there's only been a handful. So there was the 2007, 2008, there was 2020, and then there was this one. I think if you went back, there was also the 1929 period, which, but the point is, those are all really, really bad market environments. So we're a pretty tough company with those stats. So it's a very unusual time in so many ways. And we put out a letter yesterday saying we thought that there would be, we did a brief daily, which was more timely because it got out early in the market session. I had to rewrite my newsletter multiple times yesterday. There was so much price volatility going on. So we didn't get it out till almost one o'clock left coast time. So right before the market closed, we did our daily early and it basically said we thought with the VIX hit touching 60, and 60 is a big number. And that, if you put it in perspective back in the great recession, COVID had hit 80, 90 during the yen carry trade crisis of last summer, hit 60 briefly. But you typically get really nice rallies at least short-term when you have that kind of a VIX level. I think you may even have a visual on the CNN fear and greed measure, which is also very indicative that a rally was likely. There you go. Thank you.