Nick Hodge,
Publisher
April 28, 2026
Editor’s Note: Today’s editorial is adapted from the opening of the April issue of Foundational Profits. The macro setup is worth reading on its own. I walk through why the market’s recent calm may be deceptive: growth estimates are falling, inflation is rising again, rate-cut hopes have been pushed out, and the strongest sectors are already flashing a more defensive, stagflationary setup. If you’re wondering whether this rebound is real — or just a countertrend bounce before higher prices work through the economy — continue reading.
—Nick
The stock market is now slightly positive for the year.
After being down more than 8% in late March on Strait missile-induced mayhem, the S&P has put in a swift turnaround on a suspect ceasefire accompanied by demands on which neither side seems willing to budge.
Financials, Healthcare, Consumer Discretionary, and Communication sectors are all negative year-to-date. Energy, Materials, and Industrials are the clear winners.
A macroeconomic shift is underway, from rising growth and falling inflation to slowing growth and rising inflation. And we are seeing the commensurate defensiveness in markets.
Estimates for Q1 GDP continue to slide from ~3% in February before the hive got reacquainted with Middle Eastern geography to just above 1% today.
Headline inflation rose 3.26% in March after printing below 2.5% in each of the first two months of the year. Rising oil and other commodity prices look poised to continue increasing this number for the balance of the year. Do not be surprised if we see 4% by the time Santa loads his sleigh.
To combat this rise in prices, rates have self-risen like Christ from a cave. The 2-year yield started the year at 3.47% and since then has risen as much as 15% — now trading at 3.75%.
Prior to this, the market was pricing in multiple rate cuts in 2026 after J-Powell vacates the chair next month. With inflation now rising, the market has taken all cuts off the table for this year. Currently, odds don’t favor a rate cut until September of 2027.
We are still very much in the fog of war, with markets trading on headlines.
However, the VIX has cooled off significantly. And as of this writing is trading at 18.4, below where it was before bombs started dropping.
Recent rises in equities that were risk-off for the past month-and-a-half and cryptos are being buoyed in the short-term by a US dollar index that has quickly softened to back below 100 — but that now has a gap in the chart to fill.
The current calmness and asset price appreciation looks to be countertrend as we still have to deal with a Pandora’s box of price increases that will take months to flow through the economy.
As such, we will largely continue our stagflationary positioning.
The biggest change since last month’s issue is a fairly significant increase in cash. This was mainly achieved by selling the position in the Eldridge BBB-B CLO (NYSE: CLOZ).
I also sold the iShares MSCI Australia ETF (NYSE: EWA) as well as Ivanhoe Mines (OTC: IVPAF). The closed portfolio stands at 3.95% for the year.
The open portfolio continues to drive market-beating returns. Unweighted, it’s up just over 35%.
On a weighted basis, it’s up nearly 73%, driven by ongoing outsized returns in the precious metals space. Three positions are responsible for nearly two thirds of that weighted performance.
They are…
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Call it like you see it,
Nick Hodge
Publisher, Daily Profit Cycle