When the Data Goes Dark: Markets Trade on Memory, Not Reality

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🧠 Corporate Overview

Markets hate uncertainty. But what they really hate is the vacuum left when the data they worship simply vanishes.

This week, as the 43-day government shutdown finally ended Wednesday night, investors confronted something rare: a macro environment where the scoreboard stopped working. No October CPI. Possibly no October jobs report. The Bureau of Labor Statistics couldn't collect the data during the shutdown, and the White House now says those numbers may be lost forever—the first time in over 900 months the U.S. has failed to measure employment.

What happened next was predictable chaos. On Thursday, the S&P 500 dropped 1.66% to 6,737, the Nasdaq plunged 2.29% to 22,870, and the Dow fell 798 points—the worst single session since October 10. Tech got hammered. Bitcoin broke below $97,000—down over 20% from its peak—on $870 million in ETF outflows. And Disney, after missing revenue estimates despite beating on earnings, cratered nearly 8%.

At Daly Asset Management, we don't trade on hope or vibes. We trade on asymmetric return profiles grounded in data-driven systematic models. When the data disappears, so does the edge for most market participants—but not for those who understand what drives long-term value creation. The institutions panicking over missing October payrolls are the same ones chasing AI at 40x forward earnings. We build portfolios for adults who understand that volatility is the cost of admission, not a reason to leave the theater.

While retail freaks out over headlines, we're focused on what actually compounds: structurally advantaged businesses, defensive cash flow, and themes the consensus hasn't priced in yet.

💡 Stock of the Week: ConocoPhillips (COP)

Ticker: COP | Sector: Energy | Market Cap: ~$140B | Yield: 2.8%

While crypto maximalists panic-sell and tech bros discover what "correction" means, energy sits in the penalty box—unloved, cheap, and structurally essential. WTI crude is trading around $60/barrel after OPEC revised its 2026 outlook to show a potential surplus rather than deficit. Oil dropped over 4% this week on those projections. The kneejerk reaction? Energy stocks get sold indiscriminately.

That's idiotic. ConocoPhillips is the third-largest independent E&P in the U.S., with best-in-class execution, a fortress balance sheet, and a buyback program that will shrink shares by ~10% annually. At current prices, COP trades at roughly 9-10x free cash flow with a 2.8% yield that's rising as the company returns capital aggressively. The company generates returns on capital employed north of 15% even at $60 oil.

The macro setup? Fed rate cuts are still on the table for December despite the data blackout—Powell's September dot plot shows a median 4.0% terminal rate for 2025. Lower rates support economic activity, which supports energy demand. Meanwhile, geopolitical risk premiums remain elevated (BRICS continues to challenge dollar hegemony, Middle East tensions simmer), and U.S. production discipline is improving as frackers learn from 2014's mistakes.

Risks to watch: A true global recession would crater demand. A surprise surge in U.S. shale production could pressure prices. And if OPEC+ fractures, all bets are off.

Verdict: We're long because energy is essential, FCF yields are real, and the market is pricing in a scenario that's already stale. COP benefits from the rotation out of overpriced growth and into tangible cash flow. When the data comes back and shows inflation isn't dead, this trade looks even better.

📉 Market Snapshot (Week of November 3-7, 2025)

** Approximate EOW close.

This was a classic risk-off rotation disguised as a tech tantrum. The Nasdaq led losses as AI darlings (Nvidia, Broadcom, Alphabet) sold off on valuation concerns. Small caps got crushed—Russell down nearly 3%—suggesting growth fears are spreading beyond mega-cap tech. Meanwhile, gold rallied on safe-haven flows and falling Treasury yields (10-year hit 4.07% mid-week before bouncing). Bitcoin's collapse below $100K with over $1 billion in liquidations signals deleveraging in speculative assets. This isn't sector rotation—it's positioning for uncertainty.

📊 Market Commentary

The Fed's Blind Spot: Policy Without Data

The shutdown's most lasting damage isn't the $16 billion in lost federal worker wages or the 6% flight cancellations—it's the data black hole. October's CPI and jobs reports may never be released. Even November's data will be impaired by delayed collection, creating a two-month blind spot heading into December's FOMC meeting.

Fed Chair Powell warned in October: "What do you do if you're driving in the fog? You slow down." Translation: December's rate cut—previously ~80% priced by markets—is now a coin flip. The September FOMC minutes showed the Fed cut 25bps to a 4.00-4.25% range but emphasized data-dependence. Without data, the default is caution.

The market initially celebrated the shutdown's end Wednesday, with the Dow hitting 48,000 for the first time. Thursday's selloff proved that was a dead-cat bounce. Reality: economic data will remain foggy through Q1 2026, consumer sentiment just hit 50.3 (lowest since June 2022), and the Fed is trapped between still-elevated inflation (likely ~2.8% on PCE) and a slowing labor market it can't measure accurately.

Tech's Reckoning: AI Valuations Meet Gravity

Thursday's 2.3% Nasdaq plunge was the third straight day of losses for tech heavyweights. Nvidia, Broadcom, and Alphabet all dropped 2-3% on what Bloomberg framed as "valuation concerns." Let's be clear: valuations didn't suddenly become a problem—they've been a problem. The Nasdaq rallied 51% from its April low to November highs. That's not sustainable at a time when the AI infrastructure build-out—data centers, chips, power—still hasn't translated to bottom-line profitability for most players.

The rotation is real. While tech bleeds, Cisco rallied 4.5% after raising full-year guidance on strong equipment demand (yes, for AI infrastructure—but Cisco isn't priced for perfection). Financials and dividend payers helped the Dow outperform earlier in the week. This is textbook late-cycle behavior: momentum dies, defensives get bid, and growth trades mean-revert violently.

Disney's $22.46 billion revenue miss (vs. $22.75B expected) encapsulates the problem. Streaming added 3.8 million Disney+ subs, but half came from the Charter bundle deal. Linear TV revenue crashed 16%. The company beat on EPS ($1.11 vs. $1.05) via buybacks and cost cuts—not organic growth. Stock down 8%. Message received: top-line growth matters again, and financial engineering can't paper over structural decline forever.

Bitcoin's Liquidity Crisis: The "Digital Gold" Narrative Dies in Darkness

Bitcoin fell to $96,200—its lowest since May 8—after $870 million in spot ETF outflows and over $1 billion in liquidations. Long-term holders dumped 815,000 BTC over the past month—the largest wave since January 2024. Meanwhile, gold rallied to $4,171 on safe-haven flows and falling real yields.

The divergence is stark. Gold is acting like an actual hedge. Bitcoin is acting like a leveraged NASDAQ bet. The "digital gold" narrative worked when liquidity was plentiful and speculative appetite was infinite. Now? The Bitcoin treasury trade—where companies like MicroStrategy piled into BTC—is collapsing as those stocks lose their premium to NAV. Strategy is down 50% from its 2025 high.

The broader issue: Bitcoin's correlation to risk assets remains stubbornly high. When the S&P sells off, BTC sells off harder. That's not a hedge—that's beta on steroids. And with futures open interest collapsing from $94B to $66B, the leverage unwind isn't over. Until BTC decouples from equities or finds a new fundamental driver beyond "number go up," it's a trade, not a portfolio anchor.

Energy: The Most Hated Trade Is the Smartest Trade

WTI crude dropped 4.2% this week to $58.38 after OPEC's monthly report revised its 2026 forecast to show a supply surplus instead of a deficit. The report cited stronger-than-expected production from non-OPEC regions and lowered OPEC+ crude demand forecasts by 100,000 bpd.

But here's what the headline misses: U.S. crude inventories rose 1.3 million barrels, above expectations—but that's a tactical supply bump, not a structural shift. Global demand growth is slowing, yes, but it's still growing. And with capital discipline finally taking hold in U.S. shale (frackers aren't drilling themselves into bankruptcy anymore), the supply side is more rational than it's been in a decade.

Energy equities are trading like oil is going to $40. It's not. The 10-year Treasury at 4.12% makes energy's FCF yields (8-12% across major independents) look absurdly attractive. This is peak pessimism in a sector that prints cash and returns it to shareholders. The setup is textbook contrarian.

The Data Vacuum Creates Opportunity

Markets despise uncertainty, but they overreact to it. The shutdown ending doesn't mean clarity returns instantly. Goldman Sachs expects delayed CPI and jobs reports well into December, creating a fog that lasts through year-end. That means the December FOMC meeting will hinge on estimates and alternative data rather than hard BLS numbers.

Here's the play: When everyone's flying blind, the ones with instruments win. That means focusing on companies with visible, recurring revenue; businesses insulated from macro whiplash; and assets trading at valuations that assume the world ends. The panic creates dislocations. The recovery rewards discipline.

🧭 Tactical Map: Where to Lean In

• Energy majors and independents – FCF yields of 8-12% while the crowd panics over OPEC headlines. COP, OXY, CVX all fit.

• Defensive consumer staples – Consumer sentiment at 50.3 suggests spending will slow. WMT, COST, PG insulate portfolios.

• Gold and precious metals – Real yields falling, Fed pivoting dovish (eventually), geopolitical risk elevated. GLD, physical, or royalty streamers like FNV.

• Select value over growth – Tech mean reversion has legs. Financials (JPM, BAC) and industrials (CAT, DE) offer better risk/reward.

• Volatility management – VIX spiked to 21.25 on Thursday. Consider tactical hedges or cash to deploy into dips.

🔍 Theme to Watch: Energy Dominance Meets Dollar Hegemony

The energy trade isn't just about oil prices—it's about long-term structural shifts in global power. The U.S. is the world's largest oil and natural gas producer. As Europe continues to wean itself off Russian energy and Asia demands more LNG, American energy independence becomes a geopolitical weapon.

BRICS nations are accelerating efforts to trade oil in non-dollar currencies, but that's a slow-motion train wreck, not an overnight event. Meanwhile, U.S. shale's cost advantage, paired with federal policies favoring domestic production, positions American energy companies to dominate the next decade.

For equity investors, this means energy isn't just a "value play"—it's an alpha-generation engine tied to reshoring, supply chain security, and commodity scarcity. The market hates energy today. It'll love it when inflation reignites and geopolitical risk premiums get priced back in.

📅 Forward View: Nov 17-21, 2025

Key Events:

• Nov 19: Retail sales (delayed), potential BLS schedule announcement

• Nov 20: Fed speakers (Williams, Daly) on rate path post-shutdown

• Nov 21: Walmart, Target earnings—consumer spending reality check

• Dec 10: FOMC decision (25bp cut odds currently ~60%, down from 80% pre-shutdown)

Technical Levels:

• S&P 500: Support at 6,700, resistance at 6,850. Break below 6,700 targets 6,555 (October low).

• 10Y Yield: Watching 4.00% as support. Break below signals dovish Fed expectations; break above 4.20% reignites inflation fears.

Watch for BLS guidance on delayed data releases. If October jobs/CPI are officially canceled, expect heightened volatility into December. Retail earnings will be the first hard read on whether consumer sentiment at 50.3 is translating to spending cuts.

💬 Final Words

The longest government shutdown in history just ended, but the consequences—missing data, Fed uncertainty, and macro fog—will define markets through year-end. Tech's valuation reckoning is real. Bitcoin's "digital gold" narrative is broken. And energy sits unloved at valuations that scream opportunity.

At Daly AM, we don't trade narratives—we trade cash flow, structural advantages, and mispricings created by panic. The data blackout isn't a reason to sit on the sidelines. It's a reason to position where visibility exists and valuations compensate you for risk.

The fog clears for those who know where to look.

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.