Geopolitics, Pipelines, and the Return of Policy Risk

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Daly Asset Management specializes in equity portfolio construction and investment management. We serve as General Partner of affiliated investment vehicles and develop differentiated strategies across deep value, income generation, and macro-tactical portfolios.

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Stock of the Week: Energy Transfer LP (ET)

NYSE: ET | Market Cap: $59.5B | Yield: 7.39% | Forward DCF Multiple: 5.2x

We don’t chase yield. We chase durable infrastructure. And right now, Energy Transfer checks every box.

It operates one of North America’s largest pipeline networks—more than 120,000 miles—serving as the backbone for natural gas, NGLs, crude, and refined products. This is not speculative tech. This is hard, cash-generating infrastructure.

Why now?

• Cash Flow Fortress: ET’s business is fee-based and long-duration. Revenue doesn’t depend on commodity prices, but on volume. And volume is rising as the U.S. continues to export record amounts of LNG and NGLs.

• Undervalued by Any Metric: It trades at just 5.2x forward distributable cash flow—less than half the multiple of similar infrastructure REITs or utilities. That’s despite having better inflation linkage and higher barriers to entry.

• Secular Tailwinds: With geopolitical instability rising, the U.S. is aggressively positioning itself as the world’s energy supplier. ET’s Gulf Coast export capacity gives it unique leverage over this trend.

• Protected from Tariffs: Unlike semis or consumer goods, pipelines can’t be offshored. ET’s assets are embedded in the U.S. energy ecosystem—making it a rare inflation-resistant, tariff-insulated yield play.

• Balance Sheet Discipline: After years of overexpansion, ET has shifted to deleveraging and targeted capex. Distributable cash flow is strong, and the payout ratio (83%) is aggressive but manageable—especially with coverage projected to rise in 2026.

We’re not long ET because it’s popular. We’re long because it’s essential. If you want to own real assets in a world that’s de-risking from narratives and re-grounding in physical capacity, Energy Transfer is one of the cleanest ways to do it. This is infrastructure-as-alpha.

Market Snapshot: August 4–8, 2025

Markets pulled back sharply after July’s record highs, with mega-cap tech leading a short-lived Monday rally. The culprit: rising geopolitical risk, waning trust in U.S. economic data, and aggressive new tariff rollouts. The 10-year Treasury yield dropped to multi-month lows as the bond market priced in a near-certain September Fed rate cut.

Deep Dive: This Week’s Tension Points

This was not a blip. This was the market starting to adjust to a new reality.

Market Snapshot: Rip, Riposte, Reframe

Monday’s V‑shaped bounce wasn’t a conspiracy—it was instinct.
On August 4, U.S. equity markets staged a sharp rebound: the S&P 500 rallied ~1.5% to 6,329.94, the Nasdaq surged ~2%, and the Dow rose ~1.3%—recovering much of a brutal Friday, which marked its worst single-day drop since May. Small caps in the Russell 2000 also rebounded, up ~2.1% after trailing for most of the year.

The catalyst? Bad news is often good news. Earnings surprises (like Tyson) helped, but more pressure came from revised weak jobs data and the sudden firing of the BLS chief. Markets are now pricing in a September Fed rate cut.

Data Credibility—Under Siege

Last week’s most unsettling headline wasn’t about jobless figures—it was about trust. The firing of the BLS Commissioner after weak July payrolls (including a 260,000‑job downward revision) and the resignation of a Fed Governor threw cold water on data integrity. Investors are no longer reacting to the data—they're questioning whether it’s even real.

This isn’t just paranoia—it’s asymmetric risk. When confidence in official data weakens, price discovery becomes distorted, and markets shift from analysis to speculation. That’s not a healthy environment for risk-on assets.

Tariffs: Escalation Without Panic

Trump used emergency powers to roll out sweeping tariffs—up to 50% for India and as high as 200% on pharmaceuticals and 100% on chips for dozens of nations, including Taiwan and the U.K. Yet markets barely blinked.

Wall Street seems convinced: mega‑cap tech’s capex binge—AI, data centers, cloud infrastructure—is absorbing the blow. Intel took some damage, but Apple, which was rewarded for its U.S. investment expansion, rallied. The bigger picture? This is a full-on new trade regime. Tariffs aren’t bargaining tools anymore. They’re structural signals of sovereign intent.

August Pattern: Dip or Disruption?

August and September historically stink for markets. This week’s pullback was overdue—Friday broke a 32-day streak without a 1% dip, and the S&P closed below its 20‑day moving average for the first time in over a month. That puts ~6,200 as the next logical support, with February highs (~6,144) right behind.

Seasonality data backs it up. When August is negative, the average loss is –3.8%. When it’s positive, it averages +3.2%. Meanwhile, the VIX tends to rise over 8% during the month. That volatility is already creeping in.

Concentration Risk Meets Structural Strength

Market concentration is real. The “Mag 7” (Microsoft, Apple, Nvidia, Alphabet, Meta, Amazon, Tesla) remain the gravitational center of equity beta. But calling it a bubble misses the point—it’s more like a singularity.

These companies aren’t just leading on price—they’re deploying capital at scale. Capex into AI, semiconductors, and domestic infrastructure is becoming a hedge against policy shifts and tariff volatility. This isn’t a speculative frenzy—it’s a balance sheet story.

Think of last week not as panic, but as a healthy correction inside a secular bull. Overconcentration isn’t always dangerous. Sometimes, it’s just the DNA of the cycle.

Global Feedback Loop Underway

The rebound wasn’t just U.S.-driven. India’s Sensex popped over 200 points, and the Nifty crossed 24,600, led by autos and metals—classic global beta sectors reacting to U.S. dislocation. Across the Atlantic, the U.K. stumbled into contraction territory, with PMI data hitting five-year lows. That’s sparking rate cut chatter from the Bank of England. The global feedback loop is getting louder.

Tactical Map: Where to Lean In

1. Tech winners still have room—but pick your exposures.
Prefer Microsoft, Apple, and Alphabet. They’re getting rewarded for U.S. investment and AI leadership. Amazon and Tesla face more cyclic risk.

2. Commodities & structural dislocations are underpriced.
Rare earths, clean energy infrastructure, defense supply chains—these themes don’t need headlines to keep working.

3. Tariff‑resistant sectors win.
Defense, infrastructure, domestic manufacturing, and U.S.-based semis are writing the next beat of the supply chain narrative.

4. Volatility strategies are in play.
August isn’t the month to play it loose. Support at 6,200 is your line. Below that? Time to cut or hedge. With federal data under question, timing risk increases.

5. Earnings as narrative catalysts.
Roughly two-thirds of the S&P 500 has reported—80% have beaten expectations. Companies offering clarity on capex, supply chains, and margin durability are the ones to watch.

Theme to Watch

“Made Here” Is More Than Politics—It’s Policy

Tariffs aren’t isolated. They’re coordinated. From defense spending to mineral subsidies to chip grants and now raw materials floor pricing, the U.S. (and its allies) are pivoting toward supply chain control.

Investors need to treat upstream value—pipelines, rare earths, microfabrication, agriculture—as core, not niche. These assets are what will drive margins when input access matters more than brand loyalty. We’re entering an era of sovereign capital markets. Bet accordingly.

Forward View: August 11–15, 2025

Economic Data to Watch:

• CPI (Aug 13): Core inflation is expected to decelerate. A surprise re-acceleration would rattle September rate cut expectations.

• Initial Jobless Claims (Aug 15): Watch for a reversal in recent downward trend. Below 230K keeps the “soft landing” narrative alive.

• Consumer Sentiment (Aug 16): With real wage growth slowing, this could be a bellwether for Q3 spending behavior.

Earnings on Deck:

• Disney (DIS): Streaming growth vs. cost pressure.

• Eli Lilly (LLY): GLP-1 momentum.

• Palantir (PLTR): Government revenue—if flat, expect drawdown.

Final Words

Markets are recalibrating. The easy money has been made off rate cuts and AI hype. What comes next will be harder—but more rewarding.

We’re rotating out of “concepts” and into cash flow. Tariff-proof. Data-resilient. Macro-aligned. That’s where the next 20% lives.

Stay skeptical. Stay strategic. And remember—there’s no passive way to beat a narrative.

Thanks for reading. More independent strategy insight at dalyam.beehiiv.com.

Disclosures: This newsletter is for informational purposes only and does not constitute investment advice. Past performance is not indicative of future results. Always conduct your own due diligence or consult with a financial advisor before making investment decisions.