The Daly Asset Management Fund is Officially Live

After months of building, backtesting, and refining, Daly Asset Management is officially live.

You can now invest directly in our systematic, data-driven strategies at dalyassetmanagement.com. This isn't your advisor's 60/40 portfolio. This isn't another closet index fund charging active fees. This is quantitative investing built for sophisticated, self-directed allocators who understand that alpha comes from being systematically contrarian, not chasing whatever CNBC is pumping today.

The market is rotating. Concentration is cracking. And the strategies we've deployed are built for exactly this environment.

Corporate Overview

Happy holidays from the Daly Asset Management team! We hope you're enjoying time with loved ones and maybe even sneaking in a few market checks between festivities.

And what a gift Wall Street delivered this week: the S&P 500 closed at a record 6,932 on Christmas Eve, capping off an 18% annual gain and marking the third consecutive year of double-digit returns. Not bad for an index that weathered tariff shocks, a government shutdown, and persistent inflation concerns.

At Daly Asset Management, we don't get swept up in holiday euphoria—but we also don't ignore what's working. The data says this rally has legs: Q3 GDP came in at 4.3%, the Fed delivered three rate cuts this year bringing rates to 3.5%-3.75%, and AI capex is showing up in actual productivity gains, not just PowerPoint decks.

While consensus chases momentum into crowded tech names, we're identifying value in overlooked sectors that benefit from domestic manufacturing, infrastructure spending, and the ongoing AI buildout—without paying nosebleed multiples.

Stock of the Week: Huntington Ingalls Industries (HII)

Ticker: HII | Sector: Aerospace & Defense | Market Cap: ~$10.2B | Dividend Yield: 2.1%

Micron crushed Q1 earnings this week with $13.64B in revenue (up 57% YoY) and guided Q2 to a staggering $18.7B — nearly $4B above consensus. The company is completely sold out of HBM (high-bandwidth memory) through 2026, with CEO Sanjay Mehrotra projecting the HBM market will explode from $35B in 2025 to $100B by 2028.

This isn't just another AI play. This is structural oligopoly economics. Only three companies globally can produce HBM at scale: Micron, SK Hynix, and Samsung. Supply constraints are acute, demand is insatiable, and gross margins expanded to 56.8% as the company shifts from commodity DRAM to high-value AI chips.

The stock surged 12%+ on Thursday but still trades at reasonable multiples given the multi-year visibility. With management guiding to only meeting 50-70% of customer demand, pricing power is locked in.

Risks to Watch: Memory is historically cyclical. If hyperscalers pause AI capex or if a glut emerges post-2026, margins compress fast. Samsung could catch up in HBM4 yields. Tariffs on semiconductor equipment remain a wildcard.

Verdict: We're long because Micron is essential infrastructure for the AI buildout. This isn't speculation on software valuations — it's supply-demand fundamentals in a three-player oligopoly with multi-year sold-out order books.

Market Snapshot (Week of Dec 22–26, 2025)

This was a classic de-risking week. Equities sold off in holiday-thinned trading as 10-year yields surged above 4.6%—the highest since May—on Fed hawkishness and stronger-than-expected PCE inflation data. Small caps and crypto got hammered hardest, signaling a flight to quality. Crude's drop reflects demand concerns from China's sluggish recovery, not supply disruption. Gold's resilience despite rising real rates tells you institutional hedging remains active.

Market Commentary

The AI Productivity Miracle Is Real

2025 wasn't just another year of AI hype—it was the year AI-related investments accounted for 37% of real U.S. GDP growth. That's not a typo. Corporate America isn't just buying GPUs—they're deploying AI systems that are materially improving margins and productivity.

Q3 GDP came in at 4.3%, well above the 3.2% estimate, driven by consumer spending that expanded 3.5%. This isn't stimulus-fueled sugar high—it's productivity-driven growth. Companies are maintaining high margins despite rising labor costs because AI is doing the heavy lifting.

The market rewarded this. Western Digital surged 261% on AI storage demand. Nvidia briefly hit a $5 trillion market cap before settling around $4.2 trillion. Palantir rallied 158% as its enterprise AI platform became standard for government and corporate logistics.

The implication for 2026: the AI trade is broadening. The picks-and-shovels plays (AMAT, KLAC, ASML) and enterprise software beneficiaries (NOW, CRM) offer exposure without paying 50x sales.

The Fed's Balancing Act Continues

The Fed delivered three rate cuts this year—September, October, and December—bringing the fed funds rate to 3.5%-3.75%. But the December meeting was messy: three dissenting votes (the most in six years), with two officials wanting no cut and one wanting a 50bp cut.

The message: the Fed is divided. Core PCE inflation remains at 2.8%, well above the 2% target, while the labor market is cooling but not breaking. The dot plot shows only one cut projected for 2026, down from earlier expectations.

Here's the tactical takeaway: if you're positioned for aggressive easing, you're early. Real rates are stabilizing, which is a headwind for unprofitable growth but a tailwind for value, financials, and cash-generative cyclicals. The market is pricing in less than 15% odds of a January cut, with March looking more split.

Tariffs: The Volatility That Never Sleeps

Trump implemented 25% tariffs on Canada and Mexico, 10% on China back in February, triggering the "Tariff Shock" that saw the S&P 500 plunge 11% in two sessions in April. The recovery was swift, aided by the One Big Beautiful Bill Act signed July 4 that made 2017 tax cuts permanent and injected $144 billion into the economy.

But tariffs aren't going away. Reciprocal tariffs on dozens of countries expanded throughout the year, and the Supreme Court is hearing challenges to whether Trump's emergency powers justify such sweeping duties.

The winners are clear: domestic manufacturers with pricing power (CAT, DE, ETN), reshoring beneficiaries, and industrial infrastructure plays. The market has learned to price in policy volatility—the April crash and subsequent recovery taught investors that tariff bark is worse than bite when domestic supply chains adapt.

Precious Metals: The Quiet Outperformers

Gold hit its 54th record close of 2025, finishing above $4,530—up nearly 70% for the year. Silver surged over 150%, driven by industrial demand and physical supply concerns.

This isn't just inflation hedging—it's a regime shift. Central banks bought record amounts of gold, led by China, Russia, and emerging markets diversifying away from Treasuries. Even as real yields stabilized, gold held firm, signaling institutional conviction in monetary regime uncertainty.

The tactical play: gold miners (NEM, FNV) offer leverage to price moves, while physical gold and silver provide portfolio insurance against fiscal dominance concerns that aren't going away.

Small Caps: Waiting for Their Moment

The Russell 2000 gained 0.8% this week but remains the unloved trade of 2025. Why? Higher-for-longer rates and tariff uncertainty disproportionately impact smaller firms with floating-rate debt and less pricing power.

But the valuation gap between the Russell 2000 and S&P 500 is near 10-year wides. If tariffs force reshoring and the Fed resumes cuts in H2 2026, small caps could rip. This is either a value trap or the setup of the decade—we're leaning toward the latter, but timing is everything.

Tactical Map: Where to Lean In

• Defense & Aerospace: Naval expansion, space infrastructure, and missile defense are bipartisan priorities. HII, LHX, RTX.

• Domestic Industrials: Reshoring beneficiaries with pricing power. CAT, DE, ETN.

• Energy Infrastructure: Pipelines and LNG exporters with cash flow visibility. EPD, ET, LNG.

• Semiconductors (Ex-Nvidia): Pick-and-shovel plays on AI capex. AMAT, ASML, KLAC.

• Gold Miners (Optionality): Leverage to rising gold prices if fiscal concerns accelerate. NEM, FNV, WPM.

Theme to Watch: The Great Reshoring

Tariffs aren't just headlines—they're the opening salvo of a multi-decade supply chain realignment. For 30 years, U.S. companies optimized for lowest cost. That meant offshoring to China, Vietnam, and Mexico. Now, the calculus is shifting toward resilience over efficiency.

Reshoring announcements in 2024 hit $145 billion, up 30% YoY. This includes chip fabs (TSMC Arizona, Intel Ohio), EV battery plants (Ford, GM), and pharmaceutical manufacturing. The CHIPS Act allocated $52 billion for domestic semiconductor production. The Inflation Reduction Act is driving $400B+ in clean energy capex.

This isn't partisan—it's structural. The equity alpha is in industrial REITs near logistics hubs, domestic manufacturers with capex tailwinds, and automation providers (ROK, CGNX) enabling nearshoring without labor inflation.

Forward View: Week of Dec 30–Jan 3, 2026

Key Events:

• Dec 31: Year-end rebalancing flows (watch volatility)

• Jan 2: ISM Manufacturing PMI (consensus: 48.2 – still contractionary)

• Jan 3: December Jobs Report (NFP estimate: +165K; unemployment holding at 4.2%)

• Geopolitical: Watch for Ukraine-Russia ceasefire negotiations as Trump takes office

Technical Levels:

• S&P 500 support: 5,850 (200-day MA), then 5,780

• 10Y yield resistance: 4.65% (May 2024 high)

If NFP comes in hot and yields push through 4.65%, expect more tech weakness. If PMI surprises to the upside, cyclicals and small caps could catch a bid.

Final Words

Wall Street just delivered an 18% annual gain and record highs heading into the new year—not bad for a year that included tariff chaos, a government shutdown, and persistent inflation.

The lesson: markets climb walls of worry when productivity growth is real and corporate earnings hold up. 2026 will test whether this rally can broaden beyond AI and mega-caps into the value and cyclical plays that have lagged.

Daly Asset Management exists to help independent investors navigate markets with data-driven strategies and transparent execution. No hidden fees, no lazy narratives—just systematic approaches built for allocators who think for themselves.

Sign up here for early access. 2026 is shaping up to be the year where alpha separates from beta. Position accordingly, and happy new year.

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.