Tariff-Burned Rally Meets Stagflation Reality

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Stock of the Week: ENB (Enbridge Inc.)

Ticker: ENB (Enbridge Inc.) | Sector: Energy Infrastructure / Midstream | Market Cap: ~$75B | Dividend Yield: ~5.8%

Enbridge is one of the largest pipeline and energy infrastructure firms in North America, moving roughly 30% of U.S. crude oil and 20% of its natural gas. In a week dominated by stagflation chatter, tariff shocks, and rotation out of over-crowded tech trades, ENB represents exactly the kind of structural ballast this market demands. Its revenues are largely fee-based, inflation-linked, and backed by long-term contracts—meaning cash flows don’t swing wildly with oil prices. Recent earnings revisions have been moving higher, and the dividend yield of 5.8% makes it one of the more attractive income plays in the sector.

Tariff regimes and supply-chain nationalism are repricing the value of domestic energy security. Pipelines aren’t glamorous, but they’re essential. If stagflation risk persists—where inflation stays sticky but growth moderates—hard assets with yield become core allocations. ENB is positioned to benefit from both themes: stability in a volatile rate environment, and leverage to the energy independence narrative.

However, there are some risks to consider. Regulatory bottlenecks on new projects, ESG pressures, and debt servicing costs in a higher-for-longer rate climate. But dividend coverage remains strong, and leverage is manageable relative to peers.

I’m long because it’s essential. In a market obsessed with AI froth, ENB is the kind of real-asset cash machine that pays you to wait while others chase momentum.

📉 Market Snapshot (Week of August 12–18, 2025)

Equities ripped to fresh record highs midweek on softer CPI, but the glow dimmed fast as hotter PPI data reset expectations. Small-caps outperformed with the Russell 2000 up nearly 3%, hinting at rotation beneath the surface. Meanwhile, yields crept higher, crude softened, gold lost shine, and Bitcoin drifted sideways. The headline: optimism is running ahead of fundamentals.

Market Commentary

1. CPI Relief Meets PPI Reality

The week began with CPI showing disinflation momentum, fueling record highs across major indexes. But wholesale inflation told another story: PPI rose 0.9% in July, the sharpest monthly jump in over two years. Services and capital goods were the culprits, raising red flags about cost pass-throughs. For the Fed, this creates a dilemma: cut too fast and risk stoking demand, wait too long and risk policy overtightening. Markets priced in aggressive cuts early in the week, only to scale back expectations by Friday. That whipsaw is the definition of stagflation risk—data pushing in opposite directions.

2. Labor Market Softening—but Not Cracking

Unemployment has edged up to ~4.2%, payroll growth is slowing, and revisions are trending weaker. But prime-age participation remains solid, suggesting slack is limited. Immigration and demographic factors cloud the picture further. Weakening retail hiring and slowing housing permits point to caution, but construction starts remain elevated. This is not a labor collapse—it’s a slow grind. The Fed will hesitate to declare victory until wages roll over meaningfully.

3. Tariff Nationalism Is Here to Stay

Despite peace optics abroad, tariffs remain a domestic economic weapon. Supply chains are being forcibly localized. Canada, Mexico, and China continue to face shifting U.S. trade postures, and corporate capex is being redirected into domestic manufacturing and logistics. This environment directly benefits companies like Enbridge: infrastructure operators that gain from secure, regional energy flows. Tariffs and reshoring don’t just disrupt trade—they create pricing power for domestic pipelines and utilities.

4. Breadth Is Weak, Leadership Is Narrow

Less than half of S&P 500 constituents are participating in the rally, even as benchmarks hit records. AI leaders like Nvidia and Palantir faded during the week, highlighting exhaustion in the hype trade. Market leadership is concentrated in a handful of mega-caps. That narrow breadth creates fragility: if one or two leaders stumble, index levels could reset sharply. Allocators chasing momentum indexes are buying fragility, not strength. Defensive barbell allocations—quality infrastructure like ENB on one end, selective growth on the other—are the only rational path.

5. Institutional Positioning: Buybacks vs. Insider Selling

July marked the heaviest corporate buyback month in two decades, with boards signaling confidence in their valuations. Yet insider selling surged at the same time. That divergence tells you one thing: corporate treasurers see opportunistic use of balance sheets, but executives themselves are booking liquidity. Smart allocators take the hint—this is not an “all-in” market. Buybacks support the tape, but insider selling underlines valuations are stretched.

6. Sector Rotation: Small Caps, Cyclicals, and Defensives

The Russell 2000’s outperformance suggests cash is rotating into domestic cyclicals. Retail earnings from Walmart and Home Depot will test whether consumer demand is holding outside the top 10% income bracket. Energy infrastructure outperformed quietly, and clean energy stocks popped on tax credit headlines. But the real shift is into companies with pricing power and predictable cash flows. Enbridge, UnitedHealth, and quality small-caps fit this bill. AI-only narratives do not.

🧭 Tactical Map: Where to Lean In

• Energy Infrastructure (ENB, KMI, WMB): Inflation-linked, tariff-protected, high-yield.

• Healthcare / Insurers (UNH, CNC): Counter-cyclical with strong pricing power.

• Short Duration Fixed Income: Lock in yields while stagflation risk lingers.

• Select Consumer Staples / Discount Retailers: Hedge against middle-income weakness.

• Quality Small-Caps with Cash Flow: Benefiting from rotation but screened for earnings resilience.

🔍 Theme to Watch: “Pipelines as Sovereign Assets”

In a tariff-scarred world, energy transport is no longer just infrastructure—it’s sovereignty. North America’s pipelines form the backbone of energy independence. As tariffs fracture global flows, domestic transport capacity gains geopolitical premium. Enbridge’s cross-border network is effectively a strategic asset, connecting Canadian oil sands and U.S. demand centers. For allocators, this theme means pipelines aren’t just income plays—they’re national security investments with equity upside.

📅 Forward View: August 19–25, 2025

• Jackson Hole Symposium (Aug 22–23): Powell’s remarks will determine if September still holds a cut. Expect volatility.

• Data Releases: Flash PMI (Aug 21), retail sales, PPI, and weekly claims—all potential catalysts.

• Earnings: Walmart, Home Depot, and Lowe’s—critical consumer barometers.

• Geopolitical Watch: Any fallout from U.S. tariff negotiations or foreign policy summits.

• Technical Levels:

  • S&P 500: support at ~6,445, resistance at ~6,490.

  • Russell 2000: 2,280–2,320 band is key.

  • 10-Year Yield: Watch 4.3–4.5%. A breakout above 4.5% could reset risk pricing.

💬 Final Words

This market is not 2021’s party—it’s a stagflation tug-of-war dressed up in record highs. Inflation is sticky, tariffs are structural, and AI hype is showing cracks. Conviction today means allocating to real cash-flow assets like Enbridge, defensive moats, and selective cyclicals—not consensus momentum. Daly Asset Management cuts through the noise and delivers clarity when it’s most needed.

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.