Powell’s Cut: Stability Sacrificed for Optics

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Ticker: GMED (Globus Medical) – Medical Devices (Mid Cap; ~$7.5 billion)

Globus Medical, a musculoskeletal and spine device company, is one of the few undervalued healthcare names left standing in a market obsessed with AI multiples. GMED trades at ~19.3x forward earnings, versus ~22.8x for the broader Medical Instruments industry. Its PEG ratio of 1.7 and price-to-cash-flow of just 9.3x highlight real value at a time when mega-cap tech trades at premiums with no margin of safety. Analysts have nudged earnings estimates for FY25 higher over the past 60 days (now $3.21/share), and the company has delivered an average 10.8% earnings surprise. With operations in 50+ countries, it’s positioned for secular, demographic-driven growth—an aging population that requires more orthopedic solutions, regardless of GDP cycles.

In an environment where the Fed just pulled the trigger on a premature cut, threatening longer-term stability, we want exposure to companies insulated from policy whiplash. Healthcare fits. GMED is a “quiet compounder” candidate: not glamorous, not speculative, but structurally sound. It balances portfolios otherwise overweight expensive cyclicals or AI-driven growth trades. Competitive pressures from larger medtech players, execution risk in scaling international sales, and potential U.S. reimbursement headwinds. Healthcare always carries a policy overhang.

We’re long GMED here. In a market overpaying for narratives, GMED offers real value in a sector built on demographic inevitability.

📉 Market Snapshot (Week of August 25, 2025)

The S&P 500 hit a record close at 6,501.86 before easing Friday, ending the week modestly higher. The Dow notched fresh highs, while the Nasdaq slipped as tech digested tariffs and mixed earnings. The Russell 2000 gained, supported by industrial and reshoring plays. 10-year yields eased to ~4.23%, reflecting cut expectations. Gold spiked above $3,400 before settling near $3,367, while WTI crude rose nearly 2% on geopolitical risk. Bitcoin slid ~3% to $110K, underscoring stress at the speculative edges. Surface calm hides policy risk: Powell’s dovish tilt cheered equities but stoked credibility concerns, leaving markets balanced between euphoria and fragility.

Market Commentary

Introduction: A Cut That Didn’t Need to Happen

Markets cheered Jerome Powell’s signal of a rate cut, pushing the S&P 500 to a fresh record close at 6,501.86 on Thursday. But the optics are bad—and the policy case is worse. Inflation hasn’t been beaten, jobs data remains stable, and asset markets were functioning. Cutting now looks less like stewardship and more like capitulation to politics. The Fed spent years rebuilding credibility after the “transitory” debacle. This week, it put that credibility back on the chopping block.

1. Fed Credibility Cracks Wide Open

The 10-year Treasury yield slipped to ~4.23% by Friday, signaling the bond market is bracing for easier policy. But investors aren’t celebrating discipline—they’re questioning resolve. With the dollar already down double digits YTD, a politically tinged cut accelerates capital-flight risk. Inflation expectations, previously anchored, may unmoor. In plain terms: the Fed just served up sugar water when the system needed restraint. Stocks rallied, but the longer-term cost is credibility and volatility.

2. Tariff Shock = Rotation Play

Washington escalated with $300B+ in new semiconductor tariffs while simultaneously hitting India with 50% levies tied to Russian oil purchases. The EU lobbied for relief on steel and autos. The immediate losers: global tech balance sheets, with the Nasdaq ending the week in the red despite Nvidia’s blockbuster earnings. Quiet winners: defense, industrials, and reshoring names, sectors seen as tariff-sheltered. This is the rotation that matters—capital crowding into domestic balance sheets as globalization retreats.

3. Real Rates Anchor, Gold Tests Air

Gold surged above $3,400 mid-week before closing near $3,367/oz on Friday. Real yields didn’t justify the breakout—this was a pure credibility hedge. If inflation runs hotter while Powell cuts, real rates compress and gold could finally have a durable leg higher. For now, it’s noise—but investors should be ready if credibility erosion turns gold from sentiment play into structural hedge.

4. Oil: Geopolitics Is the Price Trigger

WTI crude closed around $64.80, up nearly 2% on the week, not from demand but from Ukraine strikes and sanctions chatter. Energy is no longer a clean cyclical trade—it’s geopolitical insurance. Investors should hold majors and midstream infrastructure, not chase levered shale. Energy equities now function as hedges, not growth rockets.

5. Volatility and Flow Dichotomy

The VIX sank into the mid-teens, even as Bitcoin cracked ~3% to ~$110,100. Equity calm is an illusion—capital is herding into policy-anchored sectors like defense, energy, and healthcare. Speculative layers are already bleeding. Volatility is cheap insurance here. If the Fed’s credibility bleed forces an inflation repricing, today’s calm will not last.

6. Structural Cold as Consensus Warms

Consensus thinks this cut is bullish. We think it’s reckless. Tariffs, supply-chain nationalism, and sticky inflation make cuts the wrong tool at the wrong time. Structural winners—defense budgets, reshoring industrials, and healthcare demand—still exist. But the path is messier. Consensus is once again asleep at the wheel.

🧭 Tactical Map: Where to Lean In

• Healthcare (GMED): Under-owned value with demographic inevitability.

• Defense & Aerospace (LMT, RTX): Geopolitical budgets expand into elections.

• Energy & Commodities (OXY, XLE): Oil = geopolitical hedge, not demand signal.

• Infrastructure & Industrials (CAT, DE): Tariff-backed reshoring plays.

• Selective Value Tech (INTC): Domestic leverage, policy tailwinds.

• Gold Miners (tactical): A real hedge only if inflation reprices and real rates fall.

Theme to Watch: The Politicization of Monetary Policy

The most dangerous trend in global markets is not tariffs or oil—it’s central banks becoming political actors. Powell kept the Fed nonpartisan for years, steering through Trump and Biden without tilting. This cut changes that perception. Once credibility erodes, it’s nearly impossible to restore. The dollar’s weakness YTD reflects this risk. For investors, the play is simple: assume less Fed independence, more volatility, and build portfolios that can thrive under policy distortion.

📅 Forward View: August 28–September 3, 2025

• Economic Releases: ISM PMIs (Aug 29), ADP/Non-farm payrolls (Aug 29–30).

• Earnings: Nvidia, Microsoft, Amazon—capex sentiment barometers.

• Policy: EU–US tariff negotiations, India retaliation timeline.

• Technical: S&P resistance 6,480–6,500; support 6,430. 10-year yield must hold <4.3%. Gold confirmation only above $3,400.

💬 Final Words

Markets cheered Powell’s signal of a coming rate cut, but in doing so they ignored the cost: Fed credibility. Inflation is not vanquished, the dollar is weak, and politics is bleeding into monetary policy. This is not stability—it’s optics. At Daly, we don’t chase headlines. We lean into sectors insulated from this politicization—healthcare, defense, energy, industrials—and prepare for the volatility consensus refuses to price.

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.