Growth Is Back. So Is Inflation. The Trade-Off Is Getting Harder.

Corporate Overview

The AI buildout is real, the rate relief isn't, and the SaaS model is on trial. April closed as one of the strongest months for U.S. equities since 2020, with the S&P 500 gaining over 10% and the Nasdaq surging past 15%. But underneath the headline numbers, capital is rotating fast: out of legacy software, into infrastructure, energy, and the picks-and-shovels of AI industrialization. The Fed isn't cutting. The dollar is slipping. And the consumer story is splitting in two.

Daly Asset Management cuts through the noise with systematic, data-driven strategies and zero hidden fees.

Stock of the Week

Ticker: ABT | Sector: Healthcare | Market Cap: $158B | Yield: 2.78%

Abbott Laboratories has seen a massive price fall in recent days. From an all-time closing high of $136.78 on March 3, 2025, the stock has fallen to $90.79 as of April 30, 2026 -- a drawdown that now exceeds the losses Abbott posted during the 2008-09 financial crisis.

The sell-off accelerated after Abbott's Q1 2026 earnings release on April 16, where the company beat on revenue ($11.16B vs. $10.99B consensus) but trimmed full-year adjusted EPS guidance to $5.38-$5.58 from a prior range of $5.55-$5.80. The culprit: a $0.20 per-share dilution hit tied to the $23 billion acquisition of Exact Sciences, the cancer diagnostics company behind Cologuard and Oncotype DX.

The market's reaction, erasing roughly $17.5 billion in market cap, is an overreaction to a mechanical dilution event, not a deterioration in the underlying business

At the current price, ABT trades at just 15.2x the fiscal 2027 EPS consensus of $6.06, by far the lowest multiple the stock has carried in years. Meanwhile, 21 of 25 analysts rate it a buy or outperform, with a mean 12-month price target of $119 -- implying roughly 31% upside from current levels. The balance sheet, even post-acquisition, carries a credit rating of A+ from S&P. And Abbott just declared its 409th consecutive quarterly dividend since 1924, its 54th annual increase in a row -- one of the most durable dividend track records in the entire market.

Risks:

The Exact Sciences integration absorbs earnings growth through 2026 and into 2027 before turning accretive, meaning near-term EPS momentum is compressed even as revenue accelerates. Abbott also faces ongoing litigation risk tied to its premature infant formula products, with a Chicago jury recently awarding $53 million in compensatory damages to plaintiff families, a legal overhang that is not fully priced in.

Verdict:

A Dividend Monarch trading at a decade-low valuation multiple, with a fortress balance sheet and 31% upside to consensus price targets, ABT is a rare case where a blue-chip healthcare compounder is genuinely on sale.

Market Snapshot

The most notable divergence is the massive surge in WTI Crude, which climbed over 11% this week as geopolitical tensions in the Middle East and naval blockades drove an "unprecedented supply shock". This spike in energy costs has fueled inflationary concerns, leading to a sharp rise in the 10-Year Yield and creating a headwind for gold and tech-heavy indices.

Market Commentary

Big Tech Splits the Room: AI Winners and Losers Declared

Four Magnificent Seven giants reported in an 80-second window on April 29. Alphabet was the standout: Google Cloud revenues surged 63% to $20 billion, with consolidated revenue up 22% to $109.9 billion and EPS up 82% to $5.11. Meta fell more than 5% after forecasting flat revenue growth in Q2, and Amazon and Microsoft were both sent lower by roughly 3% despite beating official estimates. The market's verdict was blunt: monetizing AI matters more than spending on it.

GDP Rebounds, But the Fine Print Is Ugly

Real GDP grew at an annualized rate of 2.0% in Q1 2026, a sharp rebound from Q4 2025's 0.5% pace, driven by investment, exports, consumer spending, and government spending. The headline flatters the release. Inflation surged to 4.5%, more than twice the Fed's target, leaving the Fed with no easy moves.

Oxford Economics noted the AI buildout and tax cuts supported the core, but warned that rising energy prices will "take some of the shine off what would otherwise have been a strong year." Growth without price stability is not a bullish print.

Powell's Final Stand: Fed Holds, Then Powell Walks Out

The Fed held its benchmark rate at 3.5% to 3.75%, the third consecutive pause of 2026, with policymakers citing elevated inflation driven by rising global energy prices. The meeting turned dramatic: four FOMC members dissented in an 8-4 vote, three of them opposed to retaining any easing bias in the statement, signaling internal resistance to future cuts.

Powell confirmed he would remain on the Fed's Board of Governors after his chairmanship expired, citing ongoing legal pressure from the administration. Kevin Warsh's path to confirmation is now clear.

Strait of Hormuz: When "Incredible" Costs $4 at the Pump

President Trump told reporters this week that the blockade is "incredible" pointing out that Iran "can't get any money from oil." Markets disagree with the optimism. U.S. gas prices hit levels not seen since just after Russia's Ukraine invasion, as the combined effect of U.S. blockade and Iranian mines and drones halted Strait shipping.

Gas prices have risen more than $1 per gallon in every U.S. state since the conflict began, with Energy Secretary Wright admitting prices will stay "high and maybe even rising" until meaningful ship traffic resumes. Energy-sensitive names, airlines, and consumer discretionary are all in the crosshairs.

Tactical Map

• Defensive Reallocation into Energy and Value: Persistent geopolitical tensions in the Middle East and the closure of the Strait of Hormuz have pushed crude oil above $111 per barrel, favoring energy majors like Exxon Mobil as a hedge against rising stagflationary pressures.

• Selective Quality in Tech Post-Earnings: Following "blowout" cloud growth from Alphabet and strong Apple results, investors should prioritize cash-flow-rich "AI hyperscalers" over speculative software names, which have lagged due to high capital expenditure concerns.

• Yield-Curve Positioning for a "Higher-for-Longer" Fed: With the FOMC holding rates at 3.5%–3.75% and showing an increased "hawkish dissent" against easing bias, positioning should favor short-duration fixed income or high-yield savings to capture elevated rates while the 10-year Treasury yield remains pressured toward 4.35%.

Theme to Watch

Driven by failing peace negotiations between the U.S. and Iran and broader Middle Eastern instability, defense spending is shifting from a temporary response to a permanent macroeconomic driver.

This week, market reports highlighted that global military expenditure has hit the largest annual increase since the Cold War, effectively turning the "defense sector" into a primary pillar of economic sovereignty alongside energy and technology.

Forward View

• May 5: RBA Interest Rate Decision & Statement – 12:30 AM ET

• May 5: US ISM Services PMI – 10:00 AM ET

• May 6: US ADP Nonfarm Employment Change – 8:15 AM ET

• May 8: US Nonfarm Payrolls (NFP) & Unemployment Rate – 8:30 AM ET

Final Words

The macro picture is stagflation in slow motion: growth rebounding, inflation reaccelerating, energy spiking, and a Fed with nowhere to go.

Daly Asset Management navigates it the same way every week: systematic, data-driven, zero hidden fees.

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.