Catalyst Capital Advisors LLC announced the hiring of Larry Holzenthaler as Senior Portfolio Manager, strengthening the firm’s non-traditional fixed income capabilities and deepening its bench of experienced credit professionals.
Catalyst Capital Advisors LLC announced the hiring of two industry veterans, Tim Brand, CFA, CAIA, and Don Gentile, as RIA Sales Directors, deepening the firm’s push into the RIA channel.
By David Miller, Co-Founder and Chief Investment Officer, Catalyst Capital Advisors LLC and Rational Advisors, Inc.
Commentary as of July 13, 2026
As we enter the third quarter, the U.S. economy remains resilient, but the margin for error has narrowed. This does not look like a classic recessionary environment, but it also no longer looks like a clean, easy soft landing story. The better description is an economy that is still expanding, but with more uneven momentum, more persistent inflation pressure, and a Federal Reserve that has less flexibility than many investors hoped for earlier in the year.
The consumer remains the key pillar of the expansion. Spending has held up better than expected, supported by employment, wage growth, and household balance sheets that are still relatively healthy in many segments. However, the consumer is also becoming more selective. Higher prices, higher borrowing costs, and the cumulative impact of the last several years of inflation are clearly weighing on lower and middle income households. The most important consumer question for the second half of the year is not simply whether spending continues, but where it continues. The spending backdrop is becoming more bifurcated, with higher income consumers still in relatively strong shape while more rate sensitive and price sensitive consumers are showing signs of fatigue.
The labor market is also moving into a different phase. It is no longer as tight as it was during the post pandemic reopening period, but it has not collapsed. Job growth has slowed, wage growth has moderated, and companies appear more cautious in their hiring plans. That is exactly the type of labor market transition investors should watch carefully. A cooler labor market helps reduce inflation pressure, but it also leaves the economy more vulnerable if confidence, profit margins, or credit conditions weaken further. For now, the labor market remains supportive of growth, but it is no longer providing the same powerful tailwind it did over the last few years.
Inflation remains the central macro challenge. The major improvement from the peak inflation period is already behind us, and the final move back toward the Federal Reserve’s 2% target is proving more difficult. Goods inflation has improved, but services inflation, housing-related costs, wages, insurance, energy volatility, and geopolitical supply risks all remain important issues. This is not the same inflation cycle as 2021 and 2022, but inflation is still too high for the Fed to declare victory. Investors should be careful about assuming that the Fed will quickly return to aggressive easing unless the economic data deteriorates meaningfully.
That leaves the Federal Reserve in a difficult position. Growth is slowing enough to warrant caution, but inflation is still sticky enough to prevent an easy pivot. The Fed would likely prefer to eventually reduce rates, but the data has not given it a clean path to do so. If inflation remains elevated, the Fed may be forced to keep policy restrictive for longer. If growth weakens more sharply, the Fed could gain room to cut, but that would likely come alongside greater pressure on corporate earnings and risk assets. This is why the current setup is so challenging: good economic news can keep inflation concerns alive, while bad economic news can raise recession concerns.
Corporate America remains in better shape than many expected. Balance sheets are generally healthy, profit margins have held up reasonably well, and the largest companies continue to generate significant cash flow. One of the most important supports for the economy is the ongoing capital spending cycle tied to artificial intelligence, automation, data centers, semiconductors, energy infrastructure, and productivity-enhancing technology. This investment cycle has helped offset some of the drag from higher rates. It has also created a meaningful divergence in the market between companies directly benefiting from these trends and companies more exposed to slower consumer demand or higher financing costs.
“Q3 may be defined less by recession, and more by the tension between resilient growth, sticky inflation, and a Fed that cannot easily rescue markets unless conditions worsen.”
—David Miller, CIO
At the same time, there are real risks investors should not ignore. Fiscal deficits remain large, Treasury issuance remains elevated, and the bond market is increasingly sensitive to inflation surprises and supply concerns. Geopolitical risks also remain significant, particularly around energy markets, global trade, and the Middle East. These factors can quickly change the inflation and interest-rate outlook. In an environment where valuations in parts of the equity market are already elevated, unexpected shocks can lead to sharper volatility.
Globally, the picture remains uneven. The U.S. continues to look relatively stronger than many other developed economies, but global growth is not especially robust. Europe remains challenged by slow growth and energy sensitivity. China continues to face structural issues around property, demographics, and consumer confidence. Emerging markets are highly differentiated, with some benefiting from supply-chain shifts, commodity exposure, and better inflation trends, while others remain vulnerable to dollar strength and global funding conditions. In my view, global diversification still has value, but investors need to be selective rather than assuming broad international exposure will automatically work.
My base case for the third quarter is continued expansion, but with more volatility and greater dispersion beneath the surface. Inflation should gradually moderate if commodity markets remain stable, but the path lower is likely to be uneven. Growth should remain positive, but slower. The Fed should remain data dependent, but the bar for meaningful rate cuts appears higher than it was earlier in the year. That combination argues against making aggressive all-or-nothing macro bets.
From a portfolio perspective, I believe this environment favors balance, selectivity, and discipline. Investors can still be rewarded for owning risk assets, but the easy part of the cycle is likely behind us. Quality should matter more. Pricing power should matter more. Balance sheet strength, durable cash flow, recurring revenue, and real earnings growth should matter more. Income also remains valuable while short-term rates are elevated. Real assets and inflation-sensitive exposures may continue to play an important role as protection against supply shocks, geopolitical uncertainty, and persistent inflation risk. Alternatives and hedged strategies may also be useful in an environment where the traditional stock-bond mix can be challenged by inflation volatility.
The economy is still growing, but the market environment is becoming less forgiving. I do not believe investors need to be overly defensive, but I do believe they need to be more selective. Q3 may be defined less by recession and more by the tension between resilient growth, sticky inflation, and a Fed that cannot easily rescue markets unless conditions worsen. In that kind of environment, the goal should be to participate in upside while preparing for volatility, and to focus on strategies that do not require a perfect macro outcome to succeed.
Mr. Miller is the Chief Investment Officer of Catalyst Capital Advisors LLC, which serves as the investment adviser to the Catalyst Funds, and Rational Advisors, Inc., which serves as the investment adviser to the Rational Funds.
| Asset Class and Benchmark | Representative Index | Q2 Return |
|---|---|---|
| U.S. Equities | S&P 500 TR Index | +15.20% |
| U.S. Bonds | Bloomberg U.S. Agg Bond TR Index | +0.67% |
| International Stocks | MSCI EAFE Index | +9.80% |
| Commodities | Bloomberg Commodity TR Index | -8.08% |
Source: Bloomberg & YCharts
Q3 Equity Outlook
By Bruce Miller, CFA, Cory Krebs, CFA, and Luke O’Neill, CFA, of Cookson, Peirce, & Co., Inc.
For the second straight year, equity markets soared in the second quarter following a sharp Q1 selloff triggered by geopolitical turmoil. As a follow-on act to the tariff meltdown of 2025, March 2026 brought investors the U.S./Iran conflict. However, a combination of an easing of Middle East tensions, solid economic data, and the “here and now” of the AI infrastructure trade quickly turned investor psychology from mildly bearish to extraordinarily bullish.
It is hard to overstate the parabolic move in the companies that most directly benefit from the explosion of Capex that is being spent by the hyperscalers. Investors were amazed in 2024 at the $230B of Capex spent by GOOGL, MSFT, AMZN, META and ORCL, but these companies have now guided toward over $750B for 2026, the largest outlay of capital (as a percent of GDP) since the building of the railroads. Semiconductors have been the leading beneficiary, with the SOX Index up a whopping 88% for the quarter. Memory chips in particular have been front and center, with Micron (a top 10 position in our strategy) soaring 242% for the quarter. But it hasn’t been the semis alone. From networking equipment to optical fiber, hardware stocks have been star attractions, and industrial stocks focused on electrification and power generation have soared alongside their tech siblings.
Looking ahead, the key questions circle around the “next chapter” after such an outsized move. Much of the answer to this question revolves around timeframes. In the short term, it is impossible to expect such a move to continue. Extreme price moves, by definition, must moderate at some point, and while the timing of that moderation (or reversal) is always uncertain, wisdom dictates some caution in the near term. The AI thesis has proven to be a smashing success, but it’s highly unlikely that such verticality continues unabated without a notable pullback or consolidation.
With a wider lens, however, the backdrop that supports this meteoric move shows no signs of slowing down. Hyperscaler spending is projected to increase to at least $1 trillion in 2027. Forecasts from picks and shovels beneficiaries show increasing backlogs and hardly an ounce of caution. Micron’s projected 2027 earnings are 1,200% higher than any pre-2026 calendar year. The explosion in stock price, while parabolic and likely to consolidate in the near term, is backed by a similar explosion of underlying fundamentals, a stark contrast to 2021’s meme stock rally or the unprofitable tech of the dot-com bubble.
The valuation risk for many AI infrastructure companies is real; more importantly, the fundamental risk of AI’s inference and deep reasoning tasks becoming more efficient is a near certainty. Thus, perhaps the most critical question: Even as per-unit costs of compute will assuredly fall, will total consumption of compute actually rise? If history is any guide, cheaper and more efficient compute will not lower total spending; it will unlock a massive wave of new software enterprise demand that was previously cost-prohibitive.
Finally, after years of megacap dominance, the first six months of 2026 saw the average Mag7 stock return -1.8%, compared to the S&P 500 TR index return of +10.19%, while the small cap Russell 2000 Index was up +22.57%. We believe the democratizing impact of AI will enhance productivity across companies of all sizes but that the impact may be most keenly observed in small and mid caps. Combined with the steep valuation discount offered down market cap, this broadening trade should continue to be a tailwind to investors who purposely diversify across the market cap spectrum.
Q3 Fixed Income Outlook
By Ira Ginsburg, Rick Lam, CFA, Mike Nespola, CFA, and Natalia Lojevsky, CIFC Investment Management, LLC
The first half of 2026 posed two questions that have hung over credit markets since January. As the second half opens, neither has fully settled. The energy shock that drove headline inflation to a three-year high looked to be easing as a 60-day ceasefire reopened the Strait of Hormuz and crude gave back much of its war premium. But that ceasefire has proven fragile, and with it the quick disinflation it promised. The Federal Reserve, under Kevin Warsh’s new chairmanship, held rates steady, set forward guidance aside, and published projections whose median now points to a hike rather than a cut. “Higher-for-longer” has moved from market expectation to stated intent. Core inflation, meanwhile, held sticky near 3%, leaving little to pull the Fed off its hawkish path.
Against that unsettled backdrop, the senior secured corporate loan market posted its softest first half in four years, though the weakness was largely technical rather than fundamental. Software was the epicenter. The AI-driven repricing that first hit the sector in late January spilled from equities into loans, where a muted CLO bid and ongoing BDC redemptions left fewer buyers to meet the selling. Yet the strain was contained. The rest of the loan market held firm, and double-B loans posted gains in every month of the year.
The question for credit investors is no longer how much risk to carry but which risk to own. The top-down macro trade that set the terms through the first half has largely run its course. The two forces that weighed on loan prices last quarter now point in opposite directions. The technical side is likely to stay challenged. The CLO arbitrage remains below target, net new supply skews toward tight, higher-rated paper, and BDC flows may stay pressured. The structural bid that cushioned the market is thin for the time being, and slow to mend. The fundamental side points the other way. Second-quarter earnings should begin to separate credits caught in indiscriminate selling from those facing genuine deterioration, most consequentially in Software. The market has drawn its sharpest line there: a bid gap to the rest of the market now at 11 points, the widest of the cycle, and a share of new issuance at its lowest since 2013. In our view, the market has painted a complex sector with one brush, treating mission-critical platforms and replaceable point solutions as a single trade. Earnings are the test of that distinction, and we expect a solid Q2 season to serve as a positive catalyst, particularly for the mispriced credits swept up in the selling.
The more cautious view across the market reads this same weakness as a default cycle beginning to gather, pointing to the 2028 maturity wall and a distressed tail near cycle highs. That wall is a genuine forward risk, and one we watch closely. But we do not read this quarter’s price action as the wall arriving early. The selling was technical, not a fundamental credit signal. The realized picture remains relatively benign, with the headline default rate easing below 1% and recent months producing no new defaults at all. The gap between a placid index and a stressed tail is not a systemic warning. It is an opportunity, and it rewards selection over exposure.
Our response to this environment is not to predict which way the risks break, but to build a portfolio that can withstand them. We favor a defensively biased, up-in-quality book, one that earns its carry while the dispersion resolves. All-in yields above 8% provide that compensation, and the floating-rate structure keeps it durable across whatever path rates take. That same opportunity should begin to draw retail flows back toward the asset class, a source of demand that would help firm the technical dynamic. We have used the bouts of weakness to move further up in quality, adding selectively in higher-rated paper and leaning on new issue for incremental carry. That positions us for a credit recovery without wagering that the CLO bid firms alongside it. The risks are real and we hold them in view: commodity-linked credits, exposed again as energy volatility returns; the lowest-rated borrowers approaching the 2028 wall; and any renewed geopolitical or inflation surprise of the kind the first half delivered. The discipline-and-dispersion frame we have carried since late 2025 comes into its own this quarter. As the top-down trade gives way, disciplined credit selection is no longer only a defense, it is the source of return.
For the year ahead, that means staying invested in credit, emphasizing quality and structure, embracing risk for which you are potentially being compensated, and leaning into dispersion opportunities where available, all while maintaining risk management and disciplined underwriting as guiding principles.
CIFC Asset Management is the sub-advisor to the Catalyst/CIFC Senior Secured Income Strategy.
*Quality ratings reflect the credit quality of the underlying securities in the Fund’s portfolio and not that of the Fund itself. Quality ratings are subject to change. Moody’s assigns a rating of AAA as the highest to C as the lowest credit quality rating.
Spotlight on Convertibles
By Frank Timons, CEO, Pier 88 Investment Partners
Convertible bonds have generally outperformed other fixed income asset classes year-to-date, driven by a group of names levered to the AI trade. Investors appear to have focused more on the potential growth and productivity gains from AI over the macro shocks of the Iran conflict and knock-on effects from higher gas prices. Micro factors ruled the day as markets seemed to reward companies where underlying business fundamentals remained strong and the prospects for positive future earnings revisions drove valuations. Convertible bonds offer an attractive attribute in that they offer the potential for equity upside participation with some fixed income downside protection. We believe the asset class should continue to perform well into the second half of the year given the asset class is levered to the AI theme as technology companies issue convertibles to fund the AI build out.
The following chart* of over a dozen fixed income indices and the S&P 500 Index is illustrative:
| Ticker | Index | 2026 YTD as of 6.26.26 |
|---|---|---|
| LGTRTRUU Index | Global Aggregate – Treasuries | -0.78% |
| LUMSTRUU Index | U.S. Mortgage Backed Securities | 1.41% |
| LG30TRUU Index | Global High Yield | 1.92% |
| LEGATRUU Index | Global Aggregate | -0.10% |
| LF98TRUU Index | U.S. Corporate High Yield | 1.75% |
| LD08TRUU Index | U.S. Aggregate: Government-Related | 0.99% |
| LUATTRUU Index | U.S. Treasury | 0.65% |
| LBEATRUU Index | Euro-Aggregate | 1.36% |
| LC07TRUU Index | U.S. Universal | 1.09% |
| LBUSTRUU Index | U.S. Aggregate | 0.98% |
| EMUSTRUU Index | EM USD Aggregate | 2.06% |
| LP06TREU Index | Pan-Euro Aggregate | 1.40% |
| LF94TRUU Index | Global Inflation-Linked | 0.27% |
| LUGCTRUU Index | U.S. Gov/Credit | 0.84% |
| LGDRTRUU Index | Global Aggregate-Credit | 0.19% |
| LUACTRUU Index | U.S. Corporate Investment Grade | 1.19% |
| VX5C Index | All US IG With Cap 5% | 7.51% |
| VECEZ5C Index | ICE Core Eurozone Convertible 5% Constrained | 6.41% |
| SPX Index | S&P 500 Index | 8.04% |
*Source: Bloomberg & Pier 88 Research June 27, 2026.
As the chart depicts, convertibles outperformed the other fixed income classes year to date in 2026. Interestingly, investment grade convertibles (VX5C) outperformed high yield names, despite having higher credit quality. One would expect a higher credit profile security to be generally more defensive, and lag in a strong tape. On the contrary, year-to-date the higher quality credit convertibles outperformed their lower credit asset classes during the rally. Investment grade convertibles delivered 93% of the S&P’s return in the 1st half of the year.
Despite volatile markets, convertible bond performance remained fairly resilient. Companies levered to secular and cyclical tailwinds delivered solid Q1 earnings and positive outlooks. The stocks responded positively and the highly correlated convertible bonds participated in the rally. The delta of a convertible bond describes the correlation of the moves between a convertible bond and its companion underlying equity. The move of the convertible bond is typically proportional to the level of delta. In the second quarter, convertibles with high deltas and exposure to stocks levered to the AI infrastructure trade demonstrated strong performance. On the contrary, convertibles with low deltas or levered to out of favor sectors lagged.
We believe long-term business fundamental trends ultimately drive equity and convertible performance. Internal research suggests that the long-term capital appreciation of a convertible is tied to the growth in the value of the underlying equity. If a company grows its business and the market rewards that company with a higher equity valuation, the price of the convertible bond typically follows the path of the appreciating equity. Many companies issuing convertibles are levered to powerful secular growth trends across the economy. Those positive secular trends should bode well for the asset class.
The capital markets have been active with new issuances as companies leverage convertibles as a cheaper financing vehicle than traditional equity, and a primary tool to de-lever at a lower interest rate. There has been over $92bn of new volumes issued year-to-date with approximately 60% of that issuance in the US. The pace of deals is running about 2x over 2025. (Source: BofA Global Research June 1, 2026). Market demand for convertibles has been strong the last several years and the asset class is attracting new issuers across a variety of sectors. The AI infrastructure theme has been a major driver of new issuance. Healthcare and biotech have also seen strong issuance. Primary activity in June was very strong and a standout deal was a $19.3bn mandatory issued by GOOGL to help fund Alphabet’s AI investments.
The market is rewarding companies levered to strong secular tailwinds like the build-out of AI infrastructure and datacenters. We believe investors will continue to migrate to convertibles as a way to gain exposure to these powerful trends with an asset class that offers the potential for upside participation with downside protection.
Past performance is not a guarantee of future results.
Investors should carefully consider the investment objectives, risks, charges, and expenses of liquid alternative funds, including the Catalyst Funds and the Rational Funds. This and other important information about a fund is contained in the applicable prospectus, which can be obtained by calling 866-447-4228 or at www.catalystmf.com or www.rationalmf.com, as applicable. The relevant prospectus should be read carefully before investing.
Both the Catalyst Funds and the Rational Funds are distributed by Northern Lights Distributors, LLC (“NLD”). NLD has had no role in the structuring or distribution of any other investment products referenced herein, and is not responsible for the marketing or promotional material related to the other investment products produced or sponsored by any other firm. David Miller, Bruce Miller, Cory Krebs, Luke O’Neill, Ira Ginsburg, Rick Lam, Mike Nespola, Natalia Lojevsky, Frank Timons, Catalyst Capital Advisors, Rational Advisors, Pier 88, and CIFC Asset Management are not affiliated with NLD and Ultimus Fund Solutions.
Though the objectives, strategies and assets traded may differ significantly across liquid alternative approaches, investing in liquid alternatives generally carries certain risks. These risks may include, but are not necessarily limited to, the following: Certain funds may invest a percentage of their assets in derivatives, such as futures, forwards, options, and swaps contracts, as well as hedging strategies. The use of such derivatives and the resulting high portfolio turn-over may expose such funds to additional risks that they would not be subject to if they invested directly in the securities and commodities underlying those derivatives. These funds may experience losses that exceed those experienced by funds that do not use futures, forwards, options, and swap contracts, as well as hedging strategies. Investing in commodities markets may subject a fund to greater volatility than investments in traditional securities. Currency trading risks include market risk, credit risk and country risk. Foreign investing involves risks not typically associated with U.S. investments. Changes in interest rates and the liquidity of certain investments could affect a fund’s overall performance. Other risks include U.S. Government securities risks and investments in fixed income securities. Typically, a rise in interest rates causes a decline in the value of fixed income securities or derivatives owned by a fund. Furthermore, the use of leverage can magnify the potential for gain or loss and amplify the effects of market volatility on a fund’s share price. All funds are subject to regulatory change and tax risks; changes to current rules could increase costs associated with an investment in a fund.
The value of a fund may decrease in response to the activities and financial prospects of an individual security or group of securities held in a fund’s portfolio. Investments in foreign securities could subject a Fund to greater risks, including currency fluctuation, economic conditions, and different governmental and accounting standards. A fund’s portfolio may be focused on a limited number of industries, asset classes, countries or issuers. Certain funds may invest in high yield or junk bonds, which present a greater risk than bonds of higher quality. Other risks may include credit risks and interest rate risk, particularly with respect to floating rate loan funds. Changes in short-term market interest rates will directly affect the yield on the shares of a fund whose investments are normally invested in floating rate debt. Floating rate loan funds tend to be illiquid, and a fund might be unable to sell the loan in a timely manner as the secondary market is generally a private, unregulated inter-dealer or inter-bank re-sale market.
Any or all of the foregoing risk factors may affect the value of your investment.
The views expressed herein are as of July 14, 2026, and represent a general guide to the perspectives of the authors. The information and opinions contained in this document have been compiled or arrived at based on sources believed to be reliable and in good faith; however, no representations or warranties of any kind are intended or should be inferred with respect to the accuracy of the information contained herein or the economic return of an investment in a fund, and no assurance can be given that existing laws will not be changed or interpreted adversely. All such information and opinions are subject to change without notice.
Some of the statements in this presentation may contain or be based on forward looking statements, estimates, targets or prognoses (collectively, “forward looking statements”), which reflect the advisor’s current view of future events, economic developments and financial performance. Such forward looking statements are typically indicated by the use of words which express an estimate, expectation, belief, target or forecast. Such forward looking statements are based on an assessment of historical economic data, on the experience and current plans of the advisor and/or certain of its advisors, and on the indicated sources. These forward looking statements contain no representation or warranty of whatever kind that such future events will occur or that they will occur as described herein, or that such results will be achieved by any fund or the investments of any fund, as the occurrence of these events and the results of a fund are subject to various risks and uncertainties. The actual portfolio, and thus results, of a fund may differ substantially from those assumed in the forward looking statements. The opinions expressed reflect the advisor’s best judgment at the time this presentation was issued, and the advisor and its affiliates will not undertake to update or review the forward looking statements contained in this presentation, whether as a result of new information or any future event or otherwise.
The advisor’s judgments about the growth, value or potential appreciation of an investment may prove to be incorrect or fail to have the intended results, which could adversely impact a Fund’s performance and cause it to underperform relative to other funds with similar investment goals or relative to its benchmark, or not to achieve its investment goal.
There is no assurance that these opinions or forecasts will come to pass, and past performance is no assurance of future results.
There is a risk that issuers and counterparties will not make payments on securities and other investments.
BDC (Business Development Company) is a publicly traded investment company that supplies capital to small and mid-sized private businesses, particularly those with limited access to conventional bank financing or public markets.
Beta is a measure of a stock or portfolio’s volatility in relation to the overall market.
Bloomberg Commodity TR Index is designed to be a highly liquid and diversified benchmark for commodity investments.
Bloomberg US Aggregate Bond TR Index is a market capitalization-weighted index that is designed to measure the performance of the U.S. investment grade bond market with maturities of more than one year.
CapEx (Capital Expenditure) refers to funds a company uses to purchase, improve, or preserve long-term physical assets that support its operations and future growth.
CLO (Collateralized Loan Obligation) are structured credit products backed by a portfolio of leveraged loans, with investor interests divided into debt and equity layers that carry different risk and return profiles.
Commodities are a basic good used in commerce that are interchangeable with other commodities of the same type. Investors and traders can buy and sell commodities directly in the spot (cash) market or via derivatives such as futures and options.
Correlation is the statistical measure of how two securities move in relation to each other.
Credit Spreads are the difference in yield (return) between two debt instruments of the same maturity but with different credit ratings, reflecting the additional risk investors take on when lending to a borrower with a lower credit rating.
Currencies are money in the form of paper and coins that’s used as a medium of exchange. Currencies are created and distributed by individual countries around the world.
Duration is a measure of a bond’s sensitivity to changes in interest rates.
Large Cap is a company with market capitalization of $10 billion or more.
Megacap refers to companies with extremely large market capitalizations, typically at the top of the equity markets.
Mid Cap is a company with a market capitalization typically ranging from $2 billion to $10 billion.
MSCI EAFE Index is a broad market equity index that tracks the performance of large and mid-cap companies in 21 developed markets around the world, excluding the US and Canada.
S&P 500 TR Index is a market capitalization-weighted index that is used to represent the U.S. large-cap stock market.
Small Cap is a company with a market capitalization ranging between $250 million and $2 billion.
SOX Index (PHLX Semiconductor Sector Index) is a capitalization-weighted index that is composed of 30 semiconductor companies.
By David Miller, Co-Founder and Chief Investment Officer, Catalyst Capital Advisors LLC and Rational Advisors, Inc.
The market is entering a period where macro, not momentum, is, in our opinion, likely to drive returns. A big issue is that investors are now trying to handicap whether the Middle East shock, even after the recent ceasefire, becomes a short-lived geopolitical spike or a more durable inflationary event. If oil continues to retreat and the conflict truly does de-escalate, equities have room to recover because the first quarter already reflected a meaningful repricing of geopolitical and inflation risk.
However, if energy remains elevated, Q2 becomes much more challenging because higher fuel costs start to pressure margins, consumer spending, and the Fed’s flexibility all at once. Recent reporting and Fed-related data suggest exactly that tension: markets are hoping for de-escalation, while inflation nowcasts are already showing war-related pressure on headline prices.
My base case is that Q2 could be a more selective market than investors got used to in prior rallies. This is probably not the kind of backdrop where everything rises together. If rates stay higher for longer and inflation stays sticky, leadership should favor businesses with pricing power, durable free cash flow, and balance-sheet strength, while more rate-sensitive and lower-quality parts of the market remain vulnerable.
In other words, investors may still want exposure, but they are likely to become much less forgiving about valuation and much more focused on earnings durability. That matters because the Fed does not appear eager to change course quickly, even as markets debate whether the next move is a cut, a long pause, or in more extreme scenarios even a hike if inflation worsens.
The consumer will be one of the key swing factors this quarter. So far, the economy has held up better than many expected, with February retail sales coming in solidly, but there is a real question about how long that resilience lasts if gasoline prices stay elevated and broader cost pressures continue feeding through the system.
That is why I think Q2 is less about broad optimism and more about whether the U.S. economy can absorb an external shock without rolling over. If the consumer remains intact, the market can stabilize. If not, investors will start worrying more seriously about margin compression and slower growth into the back half of the year.
Expect volatility, expect narrower leadership, and expect markets to stay highly headline-sensitive. A benign outcome is still possible, especially if oil keeps falling and inflation pressure proves temporary.
But this is not a clean “risk-on” environment yet. It is a market that wants to rally, but still needs confirmation from energy prices, inflation data, and the Fed before investors can feel confident.
Mr. Miller is a portfolio manager for the Catalyst Systematic Alpha Fund (ATRFX), Catalyst Insider Buying Fund (INSIX), Catalyst Insider Income Fund (IIXIX), Rational Strategic Allocation Fund (RHSIX) and the Strategy Shares Gold Enhanced Yield ETF (GOLY).
By Roy Niederhoffer, Founder & President, R. G. Niederhoffer Capital Management
While the Iran war spiked volatility in March, there are other factors ruminating that seem likely to keep markets volatile well into Q2 and beyond.
Although a recent ceasefire may begin to ease some of the pressure, the Strait of Hormuz remains effectively closed, with roughly 800 tankers stranded and Iran permitting only selective passage. Even with the ceasefire, re-opening commercial shipping will take months. Brent is above $110 and WTI near $99, gas has moved from $2.93 to $3.88 in a single month, and disrupted shipping is adding costs across the supply chain. The strain on a consumer already stretched by years of cumulative inflation is likely to intensify.
The Fed has shifted to a hawkish lean, and with consumer price pressure and a 10% global tariff, easing is unlikely, particularly with nearly $40T of debt to service. Oil has already spiked, however, and this is not a situation where we might expect prices to rise indefinitely.
What makes the current dislocation particularly interesting is the speed of narrative rotation. Within a single month, the dominant market story shifted from AI monetization concerns to geopolitical supply shock to stagflation risk to tentative peace optimism. Each rotation forces a repricing. Each repricing triggers the same cognitive reflexes: recency bias drives momentum chasers into the trade just as it reverses; loss aversion forces liquidation at precisely the wrong moment; anchoring to pre-crisis levels creates a false sense of how far markets can move.
Private credit remains under stress, with the Cliffwater BDC Index down -19% since July and 25 to 40% of private credit concentrated in software, the sector most threatened by AI disruption. At conferences, private credit managers are touting dispersion of returns: “It’s not us, it’s those other bad managers.” When an industry competes on relative survival rather than absolute merit, it has a problem.
The stock-bond correlation has remained positive since 2021, meaning fixed income allocations add equity beta rather than reduce it. The S&P beta of a 60/40 portfolio has climbed to +0.71 since 2020, from +0.50 over the prior two decades. And underneath the major indices, single-stock realized volatility versus the index is at a record, as the market prices in the AI transformation per company.
And yet the right tail must also be considered. The U.S. runs deficits of 6% of GDP, and with $40 trillion in debt, asset prices could rise merely because their denominator loses value. The midterms and the government’s inability to tolerate austerity suggest the new Fed Chair may take a more accommodative stance, creating an upside surprise for stocks.
At Niederhoffer, our overlay strategy is designed to provide upside enhancement as well as downside risk mitigation. Since inflation returned post-Covid, the S&P has been up in 5 of 6 years at double its average return, and this may be the norm as the dollar debases.
We believe that factors driving increased two-sided volatility are likely to persist well beyond the current quarter.
By Natalia Lojevsky & Stan Sokolowski, CIFC Asset Management
The first quarter closed on a decidedly more cautious note than it began. Two successive shocks reshaped investor psychology across credit markets: first, the rapid repricing of the Technology and Software complex as concerns about AI-driven disintermediation spread from sector to sector with unusual speed, and second, the outbreak of armed conflict in the Middle East, which sent oil prices sharply higher and closed the Strait of Hormuz to commercial shipping.
The geopolitical dimension, still very much unresolved as we enter the second quarter, has materially altered the inflation and rate-path calculus for investors. What had been a relatively constructive backdrop for credit entering 2026 gave way to a more complex one, as rising energy costs reignited inflation expectations and all but eliminated the near-term prospect of further Fed easing. Investor confidence was further tested by a wave of elevated redemption requests from semi-liquid private credit vehicles.
Against this backdrop, the senior secured corporate loan market posted its weakest first-quarter performance since 2020, though the stress was concentrated rather than systemic. Double-B loans held positive returns even in February’s most acute period of dislocation, while several defensive sectors demonstrated genuine resilience throughout and the asset class notably outperformed both equities and traditional fixed income in March.
Entering the second quarter, the key open questions facing credit investors are not primarily about credit quality but about duration and resolution. The Strait of Hormuz closure is the most immediate macro wildcard, with oil supply constraints keeping inflation expectations elevated and the likelihood of near-term rate cuts diminished considerably. Even after the ceasefire announcement, it will take some time for normalcy to return.
The coming weeks will also bring the first full earnings season for Software and Technology borrowers since the AI disruption narrative took hold, providing hard revenue data against which to measure fears that have, in our view, run materially ahead of underlying fundamentals.
The broad-based selloff in software loans penalized mission-critical, deeply embedded platforms alongside genuinely vulnerable point solutions — a distinction the market’s indiscriminate selling largely ignored. We are closely monitoring credits with near-term refinancing exposure and elevated AI-substitution risk and have selectively reduced positions where business model vulnerability and maturity pressure create a compounding risk profile.
At the same time, we continue to find compelling opportunities in software sub-sectors where deep domain knowledge, workflow integration, and customer relationships built over decades create durable barriers to displacement, particularly in cybersecurity, core systems of record, and vertical platforms serving risk-averse enterprise end markets.
The macro backdrop is noisy, the list of risks is always long, and anxiety remains high, but fundamentals are broadly sound, default risk is manageable, and starting yields have potential to do a lot of work for investors willing to underwrite credit risk thoughtfully.
In a world where equity indices are concentrated in a handful of megacap names and valuations are rich, investors have a chance to rotate into credit strategies that offer the prospect of long-run equity-like returns for senior secured risk, effectively mitigating risk in the portfolio while keeping return targets intact.
Credit may not dominate the headlines the way AI or tariffs do — but in an environment like this, it remains a compelling opportunity to compound capital.
By Simon Lack, Founder, SL Advisors
The first quarter of 2026 has been characterized by a powerful rotation back into energy infrastructure, driven by three key forces:
Internally, we are heavily tilted toward LNG-linked names such as Cheniere Energy, Venture Global and NextDecade, all of which benefited from rising global gas demand and continued export capacity expansion. Midstream operators like Energy Transfer and Targa Resources also rallied as investors sought yield and inflation-resistant income streams.
After a negative 2025 return of (−7.8%), the sector entered 2026 with lower valuations, enabling a sharp re-rating as sentiment improved.
As we look ahead, we believe several catalysts are likely to shape performance in the midstream energy sector. Continued geopolitical uncertainty and energy security concerns are supporting LNG demand, particularly in Europe and Asia. Qatar, formerly the world’s #3 LNG exporter, is now a less reliable supplier after having declared force majeure and closing their facility. This can benefit US LNG exporters.
Midstream companies remain focused on returning capital rather than overbuilding, supporting equity valuations. As interest-rate-sensitive assets, midstream equities could outperform if yields stabilize or decline.
Despite strong fundamentals, several risks could impact the sector. While midstream revenues are largely fee-based, prolonged declines in oil or gas consumption could reduce volumes flowing through pipelines. Companies in this sector are growing payouts and also buying back stock. Higher rates could compress valuations, although many pipeline companies have contracts that link price increases to PPI.
Given the conditions, we favor the North American LNG and midstream growth story, combining high current income with capital appreciation potential. The sector’s strong Q1 performance reflects improving sentiment, LNG tailwinds, and capital discipline across the sector.
However, its concentrated structure and sensitivity to macro variables — particularly interest rates and global energy demand — mean that while upside remains compelling into Q2, there may be times of increased volatility.
Past performance is not a guarantee of future results.
INVESTORS SHOULD CAREFULLY CONSIDER THE INVESTMENT OBJECTIVES, RISKS, CHARGES AND EXPENSES OF LIQUID ALTERNATIVE FUNDS, INCLUDING THE CATALYST FUNDS AND THE RATIONAL FUNDS. THIS AND OTHER IMPORTANT INFORMATION ABOUT A FUND IS CONTAINED IN THE PROSPECTUS, WHICH CAN BE OBTAINED BY CALLING 866-447-4228 OR AT WWW.CATALYSTMF.COM OR WWW.RATIONALMF.COM, AS APPLICABLE. THE RELEVANT PROSPECTUS SHOULD BE READ CAREFULLY BEFORE INVESTING. BOTH THE CATALYST FUNDS AND THE RATIONAL FUNDS ARE DISTRIBUTED BY NORTHERN LIGHTS DISTRIBUTORS, LLC (“NLD”). NLD HAS HAD NO ROLE IN THE STRUCTURING OR DISTRIBUTION OF ANY OTHER INVESTMENT PRODUCTS REFERENCED HEREIN, AND IS NOT RESPONSIBLE FOR THE MARKETING OR PROMOTIONAL MATERIAL RELATED TO THE OTHER INVESTMENT PRODUCTS PRODUCED OR SPONSORED BY ANY OTHER FIRM. DAVID MILLER, JOE TIGAY, DWAYNE MOYERS, MARTIN LUECK, IAIN CAMERON, STRATEGY SHARES, EQUITY ARMOR, SMH ADVISORS, AND ASPECT CAPITAL ARE NOT AFFILIATED WITH NLD AND ULTIMUS FUND SOLUTIONS.
Though the objectives, strategies and assets traded may differ significantly across liquid alternative approaches, investing in liquid alternatives generally carries certain risks. These risks may include, but are not necessarily limited to, the following: Certain funds may invest a percentage of their assets in derivatives, such as futures and options contracts. The use of such derivatives and the resulting high portfolio turn-over may expose such funds to additional risks that they would not be subject to if they invested directly in the securities and commodities underlying those derivatives. These funds may experience losses that exceed those experienced by funds that do not use futures contracts, options and hedging strategies. Investing in commodities markets may subject a fund to greater volatility than investments in traditional securities. Currency trading risks include market risk, credit risk and country risk. Foreign investing involves risks not typically associated with U.S. investments. Changes in interest rates and the liquidity of certain investments could affect a fund’s overall performance. Other risks include U.S. Government securities risks and investments in fixed income securities. Typically, a rise in interest rates causes a decline in the value of fixed income securities or derivatives owned by a fund. Furthermore, the use of leverage can magnify the potential for gain or loss and amplify the effects of market volatility on a fund’s share price. All funds are subject to regulatory change and tax risks; changes to current rules could increase costs associated with an investment in a fund.
The value of a fund may decrease in response to the activities and financial prospects of an individual security or group of securities held in a fund’s portfolio. Investments in foreign securities could subject a Fund to greater risks, including currency fluctuation, economic conditions, and different governmental and accounting standards. A fund’s portfolio may be focused on a limited number of industries, asset classes, countries or issuers. Certain funds may invest in high yield or junk bonds, which present a greater risk than bonds of higher quality. Other risks may include credit risks and interest rate risk, particularly with respect to floating rate loan funds. Changes in short-term market interest rates will directly affect the yield on the shares of a fund whose investments are normally invested in floating rate debt. Floating rate loan funds tend to be illiquid, and a fund might be unable to sell the loan in a timely manner as the secondary market is generally a private, unregulated inter-dealer or inter-bank re-sale market.
The views expressed herein are as of April 8, 2026, and represent a general guide to the perspectives of the authors. The information and opinions contained in this document have been compiled or arrived at based on sources believed to be reliable and in good faith; however, no representations or warranties of any kind are intended or should be inferred with respect to the accuracy of the information contained herein or the economic return of an investment in a fund, and no assurance can be given that existing laws will not be changed or interpreted adversely. All such information and opinions are subject to change without notice. There is no assurance that these opinions or forecasts will come to pass, and past performance is no assurance of future results.
Quality ratings reflect the credit quality of the underlying securities in the Fund’s portfolio and not that of the Fund itself. Quality ratings are subject to change. Moody’s assigns a rating of AAA as the highest to C as the lowest credit quality rating.
20260413-5376989
By David Miller, Co-Founder and Chief Investment Officer, Catalyst Capital Advisors LLC and Rational Advisors, Inc.
We expect the macro environment over the coming quarter to remain defined by growth at roughly 3% acceleration in Gross Domestic Product (GDP), persistent though moderating inflation pressures, and an increasingly data-dependent Federal Reserve. While recession risks have eased relative to earlier expectations, the economy appears to maintain late cycle resilience.
U.S. growth is likely to continue, driven by loosening financial conditions, positive consumer momentum, and considerable government spending. Labor markets remain relatively firm but are showing early signs of normalization, with slower job creation and easing wage growth. This scenario favors selective exposure to individual equities that benefit from the current economic backdrop.
Inflation continues to trend lower from prior peaks, but progress remains uneven. Goods inflation has largely normalized, while services inflation (particularly housing adjacent and labor-intensive categories) remains sticky. As a result, inflation is likely to remain above the Fed’s long-term target longer than markets initially anticipated.
The Federal Reserve appears to be acting in a very data-dependent manner. Rate cuts, if they occur, are likely to be gradual and driven by clearer evidence of slowing growth, rather than a rapid return to target inflation. This supports a moderate for longer rate backdrop.
Markets are likely to experience higher volatility as investors recalibrate expectations around growth, rates, and geopolitical tensions. Equity leadership may continue to favor companies with strong balance sheets, pricing power, and durable cash flows. Fixed income is increasingly attractive from both an income and diversification perspective, particularly in higher-quality segments.
Primary risks include a sharper-than-expected slowdown in consumer spending, renewed inflationary pressures stemming from energy or geopolitical developments, and policy missteps that overly tighten financial conditions. Potential upside surprises include faster-than-expected disinflation or improved productivity trends.
We believe the current macro environment favors a balanced, risk-aware approach emphasizing quality, income, and diversification while remaining flexible as the economy transitions into the next phase of the cycle.
Mr. Miller is a portfolio manager for the Catalyst Systematic Alpha Fund (ATRFX), Catalyst Insider Buying Fund (INSIX), Catalyst Insider Income Fund (IIXIX), Rational Strategic Allocation Fund (RHSIX) and the Strategy Shares Gold Enhanced Yield ETF (GOLY).
By Paul Shen, Chief Investment Officer, R. G. Niederhoffer Capital Management
Over the past three years, equities and precious metals have rallied in unison, producing returns well above historical averages. The S&P 500 has delivered an annualized return of +22.3% since 2023—roughly 2.5 times its long-term norm. Gold’s annualized return stands at +33.1%, and silver’s at +44.6%.
Historically, equities and precious metals show no fixed relationship. They have moved together at times, diverged at others, or shown little correlation. The current positive correlation, with both asset classes advancing sharply, suggests investors are increasingly focused on real returns rather than nominal ones. This pattern often appears when confidence in fiat currencies weakens and expectations rise for declining purchasing power.
While most investors have legitimate concerns about the downside of equities, we see a potential risk on the upside as well. With the U.S. accumulating unsustainable debt and interest on debt combined with an inability on both sides of the political aisle to cut spending, paying back the $39 Trillion in significantly debased dollars is a real possibility. And in that event, is being fully invested in stocks or hard assets a necessary hedge against debasement?
Is 100% net long financial assets the new starting point of portfolio construction, rather than a diversified portfolio that seeks to earn some fraction of equity returns? In a high-inflation world, cash and assets that fail to keep pace with inflating financial assets will erode value. Diversification and downside risk mitigation could result in negative real returns, even as nominal returns appear positive.
Investors must remain alert to the possibility of an equity correction while also considering that the recent performance in silver, gold, and bitcoin may signal the onset of sustained debasement. Arguments exist on both sides:
On the bullish side (right tail risks), we see earnings growth amid a pro-business environment and the AI boom, the push upward of an accommodative new Fed
chair, continuing unchecked deficit spending, an expanding Fed balance sheet, and Trump’s desire to keep interest rates low to grow our way out of our massive debt, refinance maturing debt and finance additional deficit spending at lower interest rates.
On the bearish side (left tail risks), we have the pull downward of a potentially bursting AI bubble, inflationary pressures from tariffs (if they are upheld), trade tensions, potentially rising unemployment, tightening pressure from rising rates in Japan, higher interest rates resulting from the huge supply of U.S. debt, the unknown of geopolitical outliers, and of course stratospheric current stock market valuations which historically have led to long periods of flat performance. Finally, given the debt overhang, should inflation or some other factor keep a check on the ability to debase, a 1930’s style debt deflationary collapse is within the window of possible outcomes.
Leaders and policymakers have historically favored the path of debasement. This raises the prospect of a stock market that experiences periodic corrections yet trends higher over time as currency supply expands. In this context, effective multi-strategy portfolios will feature:
Mr. Shen is a Portfolio Manager for the Rational/RGN Hedged Equity Fund (RNEIX).
By Natalia Lojevsky and Stan Sokolowski, CIFC Investment Partners
The past year was yet another reminder that the U.S. economy and markets have an uncanny ability to confound forecasters who, once again, showed that the prognostication business is rarely a fruitful enterprise. As Howard Marks has famously said: “Being too far ahead of your time is indistinguishable from being wrong.”
Throughout the year, the headlines were bursting with panic about tariffs, AI bubbles, government shutdowns and geopolitical flashpoints and yet, growth stayed resilient, inflation cooled, and risk assets delivered a third consecutive year of exceptionally strong returns. Against that backdrop, credit markets quietly did what they are supposed to do: provide an income alternative to traditional fixed income, absorb a lot of volatility and compensate investors well for taking measured risk.
Economic activity again “beat the over.” Growth ran ahead of many early year expectations, helped by solid consumer spending, healthy household and corporate balance sheets, and a powerful AI and tech-driven Capex cycle while tariff-induced inflation undershot the direst projections.
Monetary policy shifted from restraint to gentle support as the Federal Reserve delivered a cumulative 175 basis points of rate cuts from the 2024 peak, helping ease financial conditions in combination with tighter credit spreads, higher equity prices, and lower oil in the back half of the year.
At the same time, investor anxiety remained elevated. Realized equity volatility sat in the upper historical percentiles, sentiment measures never fully embraced the good news, and investors spent the year juggling: a new U.S. administration, “Liberation Day” tariff shocks and walkbacks, the longest U.S. government shutdown on record, sticky inflation, a K-shaped economy, and constant debate about whether AI represented a productivity revolution or the next bubble.
The industrial recession also continued and bifurcation between good performers and the rest persisted (to quote David Zervos of Jefferies – “Not every company gets a participation trophy”). Yet the net result was a broadening stock market rally, record corporate margins and free cash flows, and one of the best years for buybacks and global M&A activity, underscoring how much stronger the underlying system was than the headlines implied.
In credit, it was hard to find a bullish investor, but the tape told a constructive story. Default rates in high yield and leveraged loans remained below their post-Global Financial Crisis averages and JPMorgan estimates showed default activity declined by roughly half from the prior year.
Liability management exercises (“LMEs”) helped to manage balance sheets and preserve some value. On the flip side, concerns surrounding erosion in underwriting standards and the speed and scale of capital deployment caused some indigestion in certain pockets of the market.
Also, although the U.S. M&A market saw the most activity in the past four years, highly anticipated issuance usually associated with these deals did not fully materialize. Regardless, credit fundamentals were broadly supported, leverage levels contained, and interest coverage ratios improved as interest rates fell and spreads were repriced lower.
Many issuers used this strong backdrop to term out maturities yet again as capital markets remained open, even for lower quality issuers. Tariff-sensitive sectors that were volatile in equities generally remained resilient in credit, reinforcing the message that it takes sustained earnings pressure, not just headline noise, to impact credit in a meaningful way.
Credit markets also displayed more pronounced selectivity as both credit quality and industry dispersion showed investors differentiating risk.
Overall, the dynamics of the year left credit looking quietly resilient: far from euphoric, but fundamentally sound, well refinanced, and still compensating investors. In a year dominated by anxiety and headline volatility, credit served its intended purpose in portfolios.
What has been striking in recent years is how little actually played out the way consensus had expected, and 2026 is unlikely to be different, in our view.
Baseline forecasts from across the Street see a resilient U.S. economy with above-trend or at least trend-like growth supported by pro-growth policies, One Big Beautiful Bill (“OBBBA”) stimulus, larger tax refunds, and still healthy balance sheets, even as many households feel only a mediocre recovery.
Labor markets are expected to stay relatively tight given ongoing constrained supply despite slower hiring trends, while inflation is seen remaining above the pre-COVID 2% norm in a somewhat higher and more volatile regime tied to elevated debt and deficit levels, as well as other structural shifts.
Overall, the year is likely to bring more of the same (with the usual caveats and vulnerabilities that will inevitably rear their heads).
Uncertainty clusters around tariffs, immigration, AI, fiscal dominance, and geopolitics. A new Fed chair, uneven global monetary policy, and the implementation details of the OBBBA will shape the macro path, as will the psychology of consumers and corporates—an always underappreciated but powerful driver of cycles.
Risks range from another U.S. government shutdown or policy shock to a slower rate cut path, lingering tariff effects, midterm elections, or a meaningful risk-off episode if high equity valuations decide to reset and wealth effects turn negative.
Still, most baseline scenarios call for no recession in 2026, continued AI-driven capex, and an environment where growth will be good for credit even if it never feels particularly comfortable, especially as it relates to the labor market.
The always lurking unidentified unknown remains—a major disruption, crisis or downturn that could impact all markets. Nevertheless, as the late, great Art Cashin observed, “Never bet on the end of the world, because it only happens once.”
For credit, the setup remains constructive. Most issuers enter 2026 with better fundamentals than they had a few years ago, helped by earlier refinancings, easing policy, and ongoing GDP growth, while capital markets access remains wide open, even for weaker borrowers.
Spreads should remain rangebound to the upper end of their recent bands as fundamentals hold up, and they can stay tight for longer given that rates are still relatively elevated and likely to come down only gradually.
Defaults (including Liability Management Exercises) are expected to remain contained, with demand robust due to historically high yields. Supply could be sluggish again and punctuated by bouts of “feast and famine,” all amid persistent dispersion.
From a credit cost perspective, JPMorgan’s Private Bank work suggests that, at current yield levels, default rates would need to exceed roughly 6%—in line with GFC-level averages—with recovery rates below about 40% for long-run total returns to turn negative, an extreme outcome they (and we) view as unlikely.
Carry from both rates and spreads will likely remain a meaningful driver of returns. With all-in yields still near multi-decade highs and default expectations edging lower into 2026, investors are being paid equity-like returns for senior, often first-lien risk in many parts of the credit market.
At the same time, risk is real, but it is concentrated in the tails of weaker sectors, issuers, structures, and managers.
Credit markets will also continue to converge. The line between bonds, broadly syndicated loans, and private credit continues to blur as issuers ebb and flow across channels and as private credit evolves from an illiquid, tightly held niche into a larger ecosystem reminiscent of the broadly syndicated loan market of the 1990s—albeit on a faster timeline.
Additionally, as the traditional 60/40 portfolio has exhibited nearly double its pre-COVID volatility, investors will continue to migrate toward larger alternative credit sleeves to restore portfolio resilience and income.
Lastly, with roughly $8 trillion currently parked in money market funds, any drift lower in short-term rates could catalyze a renewed hunt for yield, with floating rate and high income focused credit strategies often the first “toe in the water” for income seekers.
Of course, new years bring their share of anxiety. Key risks include, credit quality meaningfully deteriorating, or investor demand reversing but for now, the balance tilts toward opportunity for those who embrace it.
Credit is a market and an asset class that can benefit discipline over drama. The macro backdrop is noisy, the list of risks is always long, and anxiety remains high, but fundamentals are broadly sound, default risk is manageable, and starting yields do a lot of work for investors willing to underwrite credit risk thoughtfully.
In a world where equity indices are concentrated in a handful of megacap names and valuations are rich, investors have a chance to rotate into credit strategies that offer the prospect of long-run equity-like returns for senior secured risk—effectively mitigating portfolio risk while keeping return targets intact.
For the year ahead, that means staying invested in credit, emphasizing quality and structure, embracing risk for which you are being compensated, leaning into dispersion opportunities where available, and maintaining disciplined underwriting and risk management as guiding principles.
Credit may not dominate the headlines the way AI or tariffs do, but in an environment like this, it remains a compelling place to compound capital.
CIFC Asset Management is the sub-advisor to the Catalyst/CIFC Senior Secured Income Fund (CFRIX).
By Charles Ashley, Portfolio Manager, Catalyst Capital Advisors
For those unfamiliar with the term, insider buying is the legal purchase of a company’s stock by its own officers, directors, or major shareholders. It is widely considered one of the most reliable bullish market signals because these insiders—such as the CEO, CFO, and directors—likely know more about their own company than anybody else.
A logical reason for corporate insiders to buy their own stock in a meaningful manner is that they believe the stock will outperform the market.
This signal is typically used by investors to help identify stocks that are undervalued by the market; however, we have also found that insider buying can be used to identify undervalued bonds. The logic is that these well-informed insiders would not buy their own company’s shares if they believed there was a meaningful risk of bankruptcy.
We’ve found that companies default at significantly lower rates when there is insider buying in the recent past. This can be particularly valuable for bonds with shorter maturities, generally under four years.
Insider buying can be a powerful signal in any market environment, but the data must be used correctly. We focus on “open market” transactions where executives are using their own money to buy stock rather than exercising option awards.
We also like seeing cluster buys, where multiple insiders purchase shares within a short period. Additionally, buys from top executives—such as the CEO, CFO, COO, or CIO—are more valuable than those from junior executives. Finally, we look for purchases that are large enough to meaningfully impact the executive’s personal wealth.
During bull markets, when equity valuations are high, insider buying tends to slow while insider selling increases as executives take profits. In these environments, most insider purchases are “buy the dip” transactions at companies experiencing overdone, event-driven selloffs or within industries that have fallen out of favor and become oversold.
We believe this dynamic is likely to define the bulk of insider buying activity in Q1.
Based on activity observed in late 2025, corporate insiders appear to be positioning for a year in which gains in mega-cap technology have largely been realized and value is unlocked in interest-rate-sensitive and overlooked sectors.
Insiders have exited top performers—particularly in AI and semiconductors—and are rotating capital into smaller, undervalued companies that stand to benefit from rate cuts.
We favor companies with industry dominance, growing free cash flow, strong competitive moats, solid earnings-per-share growth, and high returns on equity.
There were several notable insider purchases in December at beaten-up companies. Nike director Tim Cook purchased approximately $3 million of NKE stock. Additionally, the CFO and CAO of Fiserv combined for a $1.5 million purchase of FISV stock.
Both companies represent turnaround stories with new leadership. The Nike purchase by Tim Cook is particularly noteworthy, as it marks his first open-market purchase and comes after serving as Nike’s Lead Director since 2016.
We remain optimistic that insider buying contains valuable information that can be acted upon when used correctly. In a bull market, this signal is most useful for identifying bottoms in beaten-down stocks, but it can also highlight companies that are already performing well and poised to accelerate their growth.
If markets become volatile or experience event-driven selloffs, insider activity deserves even closer attention. Periods of volatility create information vacuums, and monitoring those with an inside view can provide investors with a meaningful advantage.
Mr. Ashley is a portfolio manager for the Catalyst Systematic Alpha Fund (ATRFX), Catalyst Insider Buying Fund (INSIX), Catalyst Insider Income Fund (IIXIX), Rational Strategic Allocation Fund (RHSIX), and the Strategy Shares Gold Enhanced Yield ETF (GOLY).
Past performance is not a guarantee of future results.
Investors should carefully consider the investment objectives, risks, charges, and expenses of liquid alternative funds, including the Catalyst Funds and the Rational Funds. This and other important information about a fund is contained in the prospectus, which can be obtained by calling 866-447-4228 or at www.catalystmf.com or www.rationalmf.com, as applicable. The relevant prospectus should be read carefully before investing.
Both the Catalyst Funds and the Rational Funds are distributed by Northern Lights Distributors, LLC (“NLD”). NLD has had no role in the structuring or distribution of any other investment products referenced herein and is not responsible for the marketing or promotional material related to other investment products produced or sponsored by any other firm.
David Miller, Joe Tigay, Dwayne Moyers, Martin Lueck, Iain Cameron, Strategy Shares, Equity Armor, SMH Advisors, and Aspect Capital are not affiliated with NLD or Ultimus Fund Solutions.
Though the objectives, strategies, and assets traded may differ significantly across liquid alternative approaches, investing in liquid alternatives generally carries certain risks. These risks may include, but are not necessarily limited to, the following.
Certain funds may invest a percentage of their assets in derivatives, such as futures and options contracts. The use of such derivatives and resulting high portfolio turnover may expose funds to additional risks beyond those associated with direct investments in underlying securities or commodities. These funds may experience losses exceeding those of funds that do not use futures, options, or hedging strategies.
Investing in commodities markets may subject a fund to greater volatility than investments in traditional securities. Currency trading risks include market risk, credit risk, and country risk. Foreign investing involves risks not typically associated with U.S. investments.
Changes in interest rates and liquidity conditions may affect a fund’s overall performance. A rise in interest rates typically causes a decline in the value of fixed income securities or derivatives owned by a fund.
The use of leverage can magnify both gains and losses and amplify the effects of market volatility on a fund’s share price. All funds are subject to regulatory and tax risks, and changes to existing rules could increase investment costs.
A fund’s value may decrease due to the activities or financial prospects of individual securities or groups of securities held in its portfolio. Investments in foreign securities may expose a fund to currency fluctuations, economic conditions, and differing governmental and accounting standards.
Certain funds may focus on a limited number of industries, asset classes, countries, or issuers. Investments in high-yield or “junk” bonds involve greater risk than higher-quality bonds.
Floating-rate loan funds may be subject to credit risk, interest rate risk, and liquidity risk. These loans tend to be illiquid, and a fund may be unable to sell them promptly, as the secondary market is generally private and unregulated.
Any or all of these risk factors may adversely affect the value of an investment.
The views expressed herein are as of January 8, 2026, and represent a general guide to the perspectives of the authors. Information contained herein is believed to be reliable but is not guaranteed as to accuracy or completeness and is subject to change without notice.
Some statements may constitute forward-looking statements, reflecting current expectations or forecasts. Such statements are subject to risks and uncertainties, and actual results may differ materially. No assurance is given that any fund will achieve its objectives.
There is no assurance that opinions or forecasts will come to pass. Past performance is not indicative of future results.
There is a risk that issuers and counterparties may fail to make payments on securities and other investments.
All-In Yield – The total, fully loaded return or cost of a financial instrument, including all material components.
Bearish Sentiment – A negative outlook regarding the value or future prospects of an asset or market.
Bloomberg Commodity TR Index – A diversified benchmark designed to measure commodity market performance.
Bloomberg U.S. Aggregate Bond TR Index – A market-capitalization-weighted index measuring U.S. investment-grade bond performance.
Bullish Sentiment – A positive outlook regarding the value or future prospects of an asset or market.
Commodities – Basic goods used in commerce that are interchangeable with others of the same type.
Correlation – A statistical measure of how two securities move in relation to each other.
Credit Spreads – The yield difference between debt instruments of the same maturity but differing credit quality.
Currencies – Legal tender issued by governments and used as a medium of exchange.
K-Shaped Economy – A recovery where different sectors or groups experience divergent outcomes.
Liability Management Exercise (LME) – A strategy used by distressed borrowers to avoid traditional default or restructuring.
Mega Cap – The largest companies in the market, measured by market capitalization.
MSCI EAFE Index – An index tracking large- and mid-cap stocks across developed markets outside the U.S. and Canada.
S&P 500 TR Index – A market-cap-weighted index representing U.S. large-cap equities.
20260116-5118491
By David Miller, Co-Founder and Chief Investment Officer, Catalyst Capital Advisors LLC and Rational Advisors, Inc.
The U.S. economy is gradually slowing from the strong post-pandemic expansion, with GDP growth expected to moderate in the fourth quarter as tighter financial conditions and the lagged impact of Federal Reserve policy filter through. Consumer spending has remained resilient but is beginning to cool, particularly in discretionary areas, as households continue to draw down excess savings accumulated during the pandemic.
The Federal Reserve remains in a delicate balancing act. Inflation has eased substantially from its peak but is still running above the Fed’s 2% target, particularly in services and shelter costs. While markets are anticipating the possibility of at least one additional rate cut by year-end, the Fed continues to signal a “higher for longer” stance. Policymakers are increasingly focused on loosening, however, suggesting risks are shifting toward gradual easing if inflation continues to trend lower.
Headline CPI is expected to move lower into year-end, helped by base effects, softer goods pricing, and moderating wage growth. Still, sticky components such as shelter and services inflation remain persistent, keeping the Fed cautious. Meanwhile, the labor market, though strong, is showing early signs of cooling with slower payroll growth, rising jobless claims, and easing wage pressures. This more balanced labor environment lowers the risk of a near-term recession but reinforces the broader narrative of deceleration.
On the markets side, corporate earnings are showing signs of modest reacceleration after a shallow earnings recession earlier this year, with technology and communication services leading the rebound. Equity valuations, however, remain elevated relative to history, leaving stocks susceptible to bouts of volatility if growth disappoints. In fixed income, Treasury yields may
stabilize or drift lower as growth moderates and markets look ahead to eventual Fed cuts. Credit spreads remain tight, but higher-quality bonds appear increasingly attractive given late-cycle dynamics.
Globally, Europe continues to struggle with sluggish manufacturing activity, while China’s growth remains underwhelming despite additional policy support. Geopolitical risks from energy shocks to conflicts abroad and the early stirrings of U.S. election season add further layers of uncertainty that could drive market swings.
Overall, the economy appears to be moving toward a soft-landing scenario: slower but still positive growth, with inflation gradually trending lower. Risks remain two-sided – a sharper slowdown could force the Fed to ease more quickly, while sticky inflation could delay policy cuts.
Investors should prepare for continued volatility but also potential opportunities, particularly in quality equities and income-generating assets that can weather a late-cycle environment.
Mr. Miller is a portfolio manager for the Catalyst Systematic Alpha Fund (ATRFX), Catalyst Insider Buying Fund (INSIX), Catalyst Insider Income Fund (IIXIX), Rational Strategic Allocation Fund (RHSIX) and the Strategy Shares Gold Enhanced Yield ETF (GOLY).
By Joe Tigay, Chief Trading Officer, Equity Armor Investments.
As we close the books on the third quarter of 2025, equity markets have once again defied skeptics with a robust performance that underscores the enduring power of technological innovation and accommodative monetary conditions. The quarter’s strength was anchored by the relentless momentum of Artificial Intelligence (AI) and mega-cap technology stocks, whose earnings trajectories continue to exceed even bullish expectations. Yet as we turn our attention to the final quarter of the year, investors must navigate an increasingly complex landscape where opportunity and uncertainty exist in delicate balance.
The third quarter’s rally was no accident. Beyond the AI narrative, which has captivated markets for nearly two years, lies a more fundamental driver: persistent liquidity. Despite official communications around quantitative tightening, the practical reality is that global central banks, led by the Federal Reserve, have maintained an accommodative stance that continues to channel capital into risk assets. This liquidity backdrop has proven decisive, steering flows away from traditional safe havens and cash equivalents toward equities that promise growth and innovation. The pattern is familiar and has repeated itself across recent quarters – when money remains abundant and inexpensive, markets climb.
Looking ahead to Q4, several critical questions demand attention. Foremost among them is the specter of inflation. While price pressures have moderated from their recent peaks, the underlying economic stability we’re experiencing could paradoxically reignite inflationary pressures through commodity price increases or wage acceleration. Our assessment suggests the Federal Reserve will maintain its current policy bias, prioritizing employment stability over preemptive rate hikes. This focus on the labor market component of the Fed’s dual mandate provides a constructive backdrop for continued equity appreciation, provided inflation metrics remain cooperative. Any meaningful re-acceleration in prices, however, would immediately challenge this benign scenario and force a rapid reassessment across asset classes.
Our central thesis for the fourth quarter is that markets will continue their ascent while simultaneously experiencing heightened volatility, a phenomenon we describe as climbing the “wall of worry.” This expectation represents a notable departure from consensus thinking. Historically, rising equity prices and elevated volatility are inversely correlated; investors typically see low volatility during bull markets and vice versa. Yet current conditions suggest this relationship may break down. With the VIX trading near the lower end of its post-pandemic range despite elevated valuations, we believe the market is underpricing risk.
As stocks push higher into year-end, investors will inevitably demand greater compensation for holding risk, manifesting as sharper intraday swings and more frequent corrections even as the broader trend remains positive.
This outlook informs our positioning strategy in our own portfolios. Rather than making binary directional bets, we’ve constructed a portfolio designed to perform across multiple market states, what we term being “covered both ways.” This approach allows us to participate fully in continued market advances while simultaneously benefiting from volatility spikes that would challenge more conventional long-only strategies. In an environment where complacency has been periodically punished, such flexibility is essential.
From a sector perspective, we remain constructive on Large-Cap Technology and the core AI infrastructure companies that have led this cycle. More compelling, however, is the broadening of AI adoption beyond hardware and chip manufacturers into the enablers and application layers across diverse industries. The next phase of this mega-trend will reward companies that successfully monetize AI capabilities rather than merely those building the foundational technology. Additionally, select opportunities within the Russell 2000 are emerging, representing smaller companies poised to become tomorrow’s growth engines.
As we navigate the final quarter of 2025, our stance is one of measured optimism grounded in fundamental drivers. The combination of persistent liquidity, technological leadership, and reasonable policy accommodation creates a supportive environment for equities over both the near-term and the next one to two years. However, success will require acknowledging and preparing for the increased volatility that inevitably accompanies markets at elevated valuations.
The wall of worry remains formidable, but history suggests it’s worth climbing.
Equity Armor sub-advises the Rational Equity Armor Fund (HDCTX) and the Catalyst Nasdaq-100 Hedged Equity Fund (CLPFX).
By Dwayne Moyers, President and Chief Investment Officer, SMH Capital Advisors, LLC.
Fixed income markets posted solid results this past quarter, driven largely by monetary policy shifts and strong investor demand. The Bloomberg U.S. Aggregate Index and the High Yield Index both saw returns of more than 2% for the quarter. The Federal Reserve’s 25 basis point rate cut in September anchored short-term yields, while long-term yields rose modestly on deficit and supply concerns, steepening the curve.
Credit spreads in both investment grade and high yield tightened, supported by healthy corporate earnings, strong balance sheets, and modest net supply. Treasury performance was mixed with shorter maturities benefiting from policy expectations, while the long end faced pressure from higher term premiums. For instance, the 10-year Treasury came close to a -2% total return and the 30-year came close to a -1% total return.
Overall, credit markets delivered strong carry and spread-driven returns. However, valuations are increasingly tight, long-duration Treasuries remain vulnerable, and macro risks include inflation trends, fiscal deficits, and tariff uncertainty, which are likely to continue to shape performance. Quality credit selection will be the determining factor for producing very favorable returns. Worries in the private credit market with the recent blow ups and frauds with TriColor and First Brands have cast more doubt in the private credit markets.
Entering Q4, fixed income markets face several unresolved macro questions. Chief among them is the trajectory of inflation and how it shapes the Federal Reserve’s policy path. While one to two additional rate cuts remain likely this year, the pace will hinge on whether disinflation continues or stalls. The yield curve is expected to steepen further as front-end rates decline, and long-end yields remain pressured by heavy Treasury issuance, fiscal deficits, and elevated term premiums.
Growth is slowing, and the balance between a soft landing and a mild recession remains uncertain. Credit spreads, already tight, leave little room for further compression. Performance will therefore be driven more by carry than by spread tightening.
In summary, the quarter ahead is likely to reward higher-quality credit exposure, moderate duration, and careful sector allocation. Upside from spreads is limited, but steady income opportunities remain in corporate bonds, and selective high yield.
Mr. Moyer is a Portfolio Manager on the Catalyst/SMH High Income Fund (HIIIX) and the Catalyst/SMH Total Return Income Fund (TRIIIX)
By Martin Lueck, Co-Founder and Director of Research, and Iain Cameron, Senior Investment Solutions, Aspect Capital.
Strategies that rely on quantitative trend signals and machine-learning techniques were caught by abrupt, policy-driven reversals in early April. The tariff announcement jolted positioning across currencies, equities, and certain commodities, producing sharp reversals that penalized pre-event exposures for trend strategies. The systematic models adapted quickly to the new price information, but prices reversed again, whipsawing the emerging trends. Meanwhile, several markets, most notably government bonds and parts of the energy complex, spent long stretches in range-bound, directionless price-patterns, a difficult backdrop for trend systems.
We described Q2’s difficult market pattern as akin to an aircraft hitting turbulence: sudden, aggressive air pockets force a course-correction until cleaner air reappears. Trend programs behave similarly, actively seeking “clean air” in the form of persistent price trends, and by Q3, the air did improve. Equities re-accelerated, supported by ongoing AI-related productivity enthusiasm, and managed futures strategies captured the upwards move across not just U.S. markets, but Asian and European indices as well. Select commodities like cattle and gold also offered substantial opportunities, reenforcing the benefit of investing in a diversified multi-asset portfolio.
We believe five key macroeconomic forces might cause dramatic shifts in markets; we have called them the 5 D’s of global change.
1) Decarbonization
Accelerating clean-energy investment is reshaping commodity demand curves. But different countries are moving at different speeds: China has pivoted rapidly toward EVs and solar, while others are transitioning more gradually, creating breadth and dispersion across commodities. On the near-term horizon is the growth of AI. Equity markets have been propelled higher by AI-induced euphoria. But have markets overlooked the energy demands of the AI revolution? Generation and storage capacity need to catch up, with potential knock-on trend opportunities in fuels and metals.
2) De-dollarization
The U.S. dollar was one of the biggest movers in H1. Sentiment surrounding its ability to be the global reserve currency has soured. Irrespective of whether it’s permanent or not, we expect to see flows to other G10 currencies and therefore opportunities in FX markets. The strong bull market in gold has also been a by-product of the de-dollarization effect. Gold behaved similarly in the 1970s, a decade characterized by geopolitical unrest and repeated bouts of inflation.
3) Defense Spending
NATO countries are being held accountable to their pledges. We have seen many dramatically increase their spending on defense and rearmament. This process is expensive, it could be pro-growth, it could have a similar effect on inflation, we will wait and see. What we know is that it will involve commodity markets.
4) Deglobalization
Post-pandemic supply-chain rewiring, tariff frictions, and ‘friend-shoring’ are fragmenting market microstructures. As production and sourcing regionalize, assets in different blocs might begin to behave differently, increasing geographical dispersion and potentially creating multiple, separate asset class trends.
5) Demographics
This one will play out over a longer time horizon. The composition of societies is changing; retirement portfolios need to change with them. Aging populations and shifting dependency ratios imply longer working lives and a longer need for growth-tilted portfolios. Bonds can’t be relied on as much and alternatives should be explored, but people will need liquidity. People are living longer and fertility rates are declining, but life still happens – liquidity should always be valued.
Overall, trend following is built for change, not stasis. After a whipsaw-heavy Q2, the return of directional moves in Q3 shows how quickly managed futures can re-engage when flows re-align. We expect the “5 Ds” to keep macro dispersion elevated into 2026 and beyond, providing strong tailwinds for a diversified multi-asset trend programme.
Aspect Capital is the sub-advisor to the Catalyst/Aspect Enhanced Multi-Asset Fund (CASIX).
Past performance is not a guarantee of future results.
INVESTORS SHOULD CAREFULLY CONSIDER THE INVESTMENT OBJECTIVES, RISKS, CHARGES AND EXPENSES OF LIQUID ALTERNATIVE FUNDS, INCLUDING THE CATALYST FUNDS AND THE RATIONAL FUNDS. THIS AND OTHER IMPORTANT INFORMATION ABOUT A FUND IS CONTAINED IN THE PROSPECTUS, WHICH CAN BE OBTAINED BY CALLING 866-447-4228 OR AT WWW.CATALYSTMF.COM OR WWW.RATIONALMF.COM, AS APPLICABLE. THE RELEVANT PROSPECTUS SHOULD BE READ CAREFULLY BEFORE INVESTING. BOTH THE CATALYST FUNDS AND THE RATIONAL FUNDS ARE DISTRIBUTED BY NORTHERN LIGHTS DISTRIBUTORS, LLC (“NLD”). NLD HAS HAD NO ROLE IN THE STRUCTURING OR DISTRIBUTION OF ANY OTHER INVESTMENT PRODUCTS REFERENCED HEREIN, AND IS NOT RESPONSIBLE FOR THE MARKETING OR PROMOTIONAL MATERIAL RELATED TO THE OTHER INVESTMENT PRODUCTS PRODUCED OR SPONSORED BY ANY OTHER FIRM. DAVID MILLER, JOE TIGAY, DWAYNE MOYERS, MARTIN LUECK, IAIN CAMERON, STRATEGY SHARES, EQUITY ARMOR, SMH ADVISORS, AND ASPECT CAPITAL ARE NOT AFFILIATED WITH NLD AND ULTIMUS FUND SOLUTIONS.
Risk Considerations
Though the objectives, strategies and assets traded may differ significantly across liquid alternative approaches, investing in liquid alternatives generally carries certain risks. These risks may include, but are not necessarily limited to, the following: Certain funds may invest a percentage of their assets in derivatives, such as futures and options contracts. The use of such derivatives and the resulting high portfolio turn-over may expose such funds to additional risks that they would not be subject to if they invested directly in the securities and commodities underlying those derivatives. These funds may experience losses that exceed those experienced by funds that do not use futures contracts, options and hedging strategies. Investing in commodities markets may subject a fund to greater volatility than investments in traditional securities. Currency trading risks include market risk, credit risk and country risk. Foreign investing involves risks not typically associated with U.S. investments. Changes in interest rates and the liquidity of certain investments could affect a fund’s overall performance. Other risks include U.S. Government securities risks and investments in fixed income securities. Typically, a rise in interest rates causes a decline in the value of fixed income securities or derivatives owned by a fund. Furthermore, the use of leverage can magnify the potential for gain or loss and amplify the effects of market volatility on a fund’s share price. All funds are subject to regulatory change and tax risks; changes to current rules could increase costs associated with an investment in a fund.
The value of a fund may decrease in response to the activities and financial prospects of an individual security or group of securities held in a fund’s portfolio. Investments in foreign securities could subject a Fund to greater risks, including currency fluctuation, economic conditions, and different governmental and accounting standards. A fund’s portfolio may be focused on a limited number of industries, asset classes, countries or issuers. Certain funds may invest in high yield or junk bonds, which present a greater risk than bonds of higher quality. Other risks may include credit risks and interest rate risk, particularly with respect to floating rate loan funds. Changes in short-term market interest rates will directly affect the yield on the shares of a fund whose investments are normally invested in floating rate debt. Floating rate loan funds tend to be illiquid, and a fund might be unable to sell the loan in a timely manner as the secondary market is generally a private, unregulated inter-dealer or inter-bank re-sale market.
Any or all of the foregoing risk factors may affect the value of your investment.
The views expressed herein are as of June 30, 2025, and represent a general guide to the perspectives of the authors. The information and opinions contained in this document have been compiled or arrived at based on sources believed to be reliable and in good faith; however, no representations or warranties of any kind are intended or should be inferred with respect to the accuracy of the information contained herein or the economic return of an investment in a fund, and no assurance can be given that existing laws will not be changed or interpreted adversely. All such information and opinions are subject to change without notice.
Some of the statements in this presentation may contain or be based on forward looking statements, estimates, targets or prognoses (collectively, “forward looking statements”), which reflect the advisor’s current view of future events, economic developments and financial performance. Such forward looking statements are typically indicated by the use of words which express an estimate, expectation, belief, target or forecast. Such forward looking statements are based on an assessment of historical economic data, on the experience and current plans of the advisor and/or certain of its advisors, and on the indicated sources. These forward looking statements contain no representation or warranty of whatever kind that such future events will occur or that they will occur as described herein, or that such results will be achieved by any fund or the investments of any fund, as the occurrence of these events and the results of a fund are subject to various risks and uncertainties. The actual portfolio, and thus results, of a fund may differ substantially from those assumed in the forward looking statements. The opinions expressed reflect the advisor’s best judgment at the time this presentation was issued, and the advisorr and its affiliates will not undertake to update or review the forward looking statements contained in this presentation, whether as a result of new information or any future event or otherwise.
The advisor’s judgments about the growth, value or potential appreciation of an investment may prove to be incorrect or fail to have the intended results, which could adversely impact a Fund’s performance and cause it to underperform relative to other funds with similar investment goals or relative to its benchmark, or not to achieve its investment goal.
There is no assurance that these opinions or forecasts will come to pass, and past performance is no assurance of future results.
There is a risk that issuers and counterparties will not make payments on securities and other investments.
Bloomberg Commodity TR Index – designed to be a highly liquid and diversified benchmark for commodity investments.
Bloomberg US Aggregate Bond TR Index – A market capitalization-weighted index that is designed to measure the performance of the U.S. investment grade bond market with maturities of more than one year.
Commodities – a basic good used in commerce that is interchangeable with other commodities of the same type. Investors and traders can buy and sell commodities directly in the spot (cash) market or via derivatives such as futures and options.
Credit Spreads – The difference in yield (return) between two debt instruments of the same maturity but with different credit ratings, reflecting the additional risk investors take on when lending to a borrower with a lower credit rating.
Currencies – money in the form of paper and coins that’s used as a medium of exchange. Currencies are created and distributed by individual countries around the world.
MSCI EAFE Index – a broad market equity index that tracks the performance of large and mid-cap companies in 21 developed markets around the world, excluding the US and Canada.
S&P 500 TR Index – A market capitalization-weighted index that is used to represent the U.S. large-cap stock market.
20251002-4868015
Explore Catalyst Funds | Explore Rational Funds
By David Miller, Co-Founder and Chief Investment Officer, Catalyst Capital Advisors LLC and Rational Advisors, Inc.
As we begin Q3 2025, the investing landscape continues to be shaped by three dominant macro forces: persistent trade tensions, evolving interest rate policy, and slowing global growth expectations.
Markets entered July still recovering from the tariff-driven dislocation that rattled Q2. While the worst fears of an all-out global trade war have not materialized, tariff escalation with China, Canada, and Mexico remains a live risk. Investors are weighing the paradoxical potential for a “tariff recession” to catalyze Fed rate cuts—an echo of what we saw in 2020. In fact, markets now price in two 25 bps cuts by year-end, even as inflationary impulses remain stickier than expected due to supply chain shocks and deficit spending.
Key Signals to Watch in Q3:
Mr. Miller is a portfolio manager for the Catalyst Systematic Alpha Fund (ATRFX), Catalyst Insider Buying Fund (INSIX), Catalyst Insider Income Fund (IIXIX), Rational Strategic Allocation Fund (RHSIX) and the Strategy Shares Gold Enhanced Yield ETF (GOLY).
By Michael Dzialo, Karen Culver, Peter Swan, Zachary Fellows, John Dalton, and Nicolas Vilotti of the Managed Asset Portfolios Investment Team.
Investors would not know it from the slight gains in the broader market so far this year, but volatility has been the defining term for the first half of 2025. In fact, a recent Barron’s article mentioned that, on a risk-adjusted basis, returns for the S&P 500 this year have been in the 24th percentile since 1990, while volatility has been in the 89th percentile. Now, more so than ever, the broader markets react to headlines and tweets rather than facts and figures.
U.S. stocks fell in the first quarter after two consecutive years of gains amid rising policy uncertainty in Washington, marking the worst relative performance for U.S. stocks versus global markets in 23 years. Fast forward to the second quarter, and U.S. stocks rebounded following Liberation Day lows as global stocks treaded water. As we move into the third quarter, the same uncertainties that plagued the U.S. market in the first half of the year remain, including valuations, global macroeconomic activity, interest rates, and tariffs.
Despite the volatility this year, the S&P 500 is trading at 25.8 times trailing earnings, above the 5 and 10-year averages of 23.87 and 21.68, respectively. This compares to the MSCI ACWI ex-USA, trading at 15.92 times trailing earnings, slightly below the 5 and 10-year averages of 16.42 and 16.26, respectively. U.S. stocks have historically commanded premium valuations over most other countries for several reasons; however, we believe the delta between the two is too wide. Elevated valuations need the support of continued earnings growth. Companies reported decent earnings growth in the first quarter, yet many either pulled guidance for the rest of the year or issued softened guidance in the face of economic uncertainty.
The U.S. economy has demonstrated remarkable resilience in 2025, but cracks are beginning to form. Our investment team is closely watching the labor market as layoffs rise, and recent college graduates are having difficulty finding a job. As such, we have a cautious view on the U.S. economy. At its most recent meeting, the Federal Reserve (the “Fed”) lowered its 2025 GDP forecast to 1.4% from 1.7% while raising its forecast for core inflation to 3.1% from 2.8% in anticipation of a tick up in inflation in the coming months stemming from tariffs. Eventually, we believe the Fed will succumb to political pressure and, as the economy slows, lower interest rates, further steepening the yield curve. Either way, Fed Chair Jerome Powell’s term ends in May 2026, and whoever President Trump selects to succeed him will likely share his views that the Fed needs to lower rates.
While U.S. investors grapple with uncertainty, markets outside the U.S. appear well-positioned over the long-term. We believe that U.S. trade policies should become catalysts to push foreign nations to spend more on infrastructure and defense. As we have witnessed in the U.S. over the past several decades, spending money is stimulative to the economy. We believe Europe may be in the preliminary stages of a substantial economic rebound as spending increases.
Overall, we believe an environment of heightened geopolitical and economic uncertainty strengthens the case for active management. While we monitor, we do not act on the seemingly daily barrage of tweets and headlines coming out of Washington. Rather, we look at the bigger picture. The investment team believes the U.S. dollar will trend lower over the next few years, not necessarily in a straight line, benefiting global equities as well as select commodities. We are also overweight those sectors that historically do not rely on strong economic growth, including the Consumer Staples, Health Care, and Utilities sectors.
Managed Asset Portfolios sub-advises the Catalyst/MAP Global Equity Fund (CAXIX) and the Catalyst/MAP Global Balanced Fund (TRXIX).
By Michael Perini, Perini Capital LLC.
Murphy’s Law stating “what can go wrong will go wrong” seems like an apt description of life for fixed income investors since the beginning of 2022. Since then, investors in the asset class have had to grapple with the following:
However, perhaps the problems are not what they seem when viewed through a different lens. Maybe what fixed income investors need is a paradigm shift. While all the above-mentioned headwinds make it seem like it may be time to reduce exposure to fixed income, we disagree because of our non-traditional way of viewing the risks associated with fixed income.
In our view, there are three distinct risks to fixed income investors:
The events beginning in 2022 and continuing through today have been extremely painful from the standpoint of investors with significant interest rate risk. Interest rates have gone up (a lot!) and prices have gone down. From the standpoint of reinvestment risk, the interest rate environment since 2022 has been a big positive, as the reinvestment rate of incoming cash flows is much higher than it was prior to 2022. The reinvestment component of total return is often underappreciated, both as a counterweight to interest rate risk and as a key in creating return stability to a variety of forward interest rate scenarios. However, achieving this balance is not easy, nor is it often accessible via traditional fixed income solutions.
Traditional fixed income solutions, such as U.S. Treasuries, corporate bonds and municipal bonds, pay interest every six months and principal as a final payment at maturity; therefore, due to the lack of cash flow between issuance and maturity, the reinvestment rate of incoming cash flows is typically not a meaningful component of total return. In contrast, structured credit sectors, such as mortgage-backed-securities, often pay interest and principal every month, and because of this feature the reinvestment of incoming cash flows is generally a meaningful component of total return. Additionally, the higher the cash flow of a portfolio the lower price changes (because of changing rates) matter as a percentage of total return.
Given the uncertainty in today’s macro environment where interest rate volatility and direction will likely remain high and difficult to forecast, we believe investors should look to alternative fixed income solutions that can provide non-correlated returns, diversification and balance interest rate risk versus reinvestment risk. The paradigm shift mentioned herein has the potential to benefit investors when navigating the fixed income markets through the rest of 2025 and beyond.
Perini Capital LLC is the sub-advisor to the Catalyst/Perini Strategic Income Fund (CSIOX)
By David Miller, Co-Founder and Chief Investment Officer, Catalyst Capital Advisors LLC and Rational Advisors, Inc.
Gold remains a standout asset class as we enter Q3—offering both a potential hedge against geopolitical chaos and an escape from fiat currency erosion. A few key reasons:
We believe that the current macro environment justifies a meaningful allocation to gold and gold-related strategies.
Looking ahead, the combination of fragile equity sentiment, uncertain policy direction, and structural macro headwinds reinforces our view: gold isn’t just a crisis hedge—it’s becoming a core asset class in the modern portfolio playbook.
IMPORTANT DISCLOSURES
Past performance is not a guarantee of future results.
INVESTORS SHOULD CAREFULLY CONSIDER THE INVESTMENT OBJECTIVES, RISKS, CHARGES AND EXPENSES OF LIQUID ALTERNATIVE FUNDS, INCLUDING THE CATALYST FUNDS AND THE RATIONAL FUNDS. THIS AND OTHER IMPORTANT INFORMATION ABOUT A FUND IS CONTAINED IN THE PROSPECTUS, WHICH CAN BE OBTAINED BY CALLING 866-447-4228 OR AT WWW.CATALYSTMF.COM OR WWW.RATIONALMF.COM, AS APPLICABLE. THE RELEVANT PROSPECTUS SHOULD BE READ CAREFULLY BEFORE INVESTING. BOTH THE CATALYST FUNDS AND THE RATIONAL FUNDS ARE DISTRIBUTED BY NORTHERN LIGHTS DISTRIBUTORS, LLC (“NLD”). NLD HAS HAD NO ROLE IN THE STRUCTURING OR DISTRIBUTION OF ANY OTHER INVESTMENT PRODUCTS REFERENCED HEREIN, AND IS NOT RESPONSIBLE FOR THE MARKETING OR PROMOTIONAL MATERIAL RELATED TO THE OTHER INVESTMENT PRODUCTS PRODUCED OR SPONSORED BY ANY OTHER FIRM. DAVID MILLER, STRATEGY SHARES, MICHAEL DZIALO, KAREN CULVER, PETER SWAN, ZACHARY FELLOWS, JOHN DALTON, NICOLAS VILOTTI, MANAGED ASSET PORTFOLIOS, MICHAEL PERINI, AND PERINI CAPITAL LLC ARE NOT AFFILIATED WITH NLD.
Risk Considerations
Though the objectives, strategies and assets traded may differ significantly across liquid alternative approaches, investing in liquid alternatives generally carries certain risks. These risks may include, but are not necessarily limited to, the following: Certain funds may invest a percentage of their assets in derivatives, such as futures and options contracts. The use of such derivatives and the resulting high portfolio turn-over may expose such funds to additional risks that they would not be subject to if they invested directly in the securities and commodities underlying those derivatives. These funds may experience losses that exceed those experienced by funds that do not use futures contracts, options and hedging strategies. Investing in commodities markets may subject a fund to greater volatility than investments in traditional securities. Currency trading risks include market risk, credit risk and country risk. Foreign investing involves risks not typically associated with U.S. investments. Changes in interest rates and the liquidity of certain investments could affect a fund’s overall performance. Other risks include U.S. Government securities risks and investments in fixed income securities. Typically, a rise in interest rates causes a decline in the value of fixed income securities or derivatives owned by a fund. Furthermore, the use of leverage can magnify the potential for gain or loss and amplify the effects of market volatility on a fund’s share price. All funds are subject to regulatory change and tax risks; changes to current rules could increase costs associated with an investment in a fund.
The value of a fund may decrease in response to the activities and financial prospects of an individual security or group of securities held in a fund’s portfolio. Investments in foreign securities could subject a Fund to greater risks, including currency fluctuation, economic conditions, and different governmental and accounting standards. A fund’s portfolio may be focused on a limited number of industries, asset classes, countries or issuers. Certain funds may invest in high yield or junk bonds, which present a greater risk than bonds of higher quality. Other risks may include credit risks and interest rate risk, particularly with respect to floating rate loan funds. Changes in short-term market interest rates will directly affect the yield on the shares of a fund whose investments are normally invested in floating rate debt. Floating rate loan funds tend to be illiquid, and a fund might be unable to sell the loan in a timely manner as the secondary market is generally a private, unregulated inter-dealer or inter-bank re-sale market.
Any or all of the foregoing risk factors may affect the value of your investment.
The views expressed herein are as of June 30, 2025, and represent a general guide to the perspectives of the authors. The information and opinions contained in this document have been compiled or arrived at based on sources believed to be reliable and in good faith; however, no representations or warranties of any kind are intended or should be inferred with respect to the accuracy of the information contained herein or the economic return of an investment in a fund, and no assurance can be given that existing laws will not be changed or interpreted adversely. All such information and opinions are subject to change without notice.
Some of the statements in this presentation may contain or be based on forward looking statements, estimates, targets or prognoses (collectively, “forward looking statements”), which reflect the advisor’s current view of future events, economic developments and financial performance. Such forward looking statements are typically indicated by the use of words which express an estimate, expectation, belief, target or forecast. Such forward looking statements are based on an assessment of historical economic data, on the experience and current plans of the advisor and/or certain of its advisors, and on the indicated sources. These forward looking statements contain no representation or warranty of whatever kind that such future events will occur or that they will occur as described herein, or that such results will be achieved by any fund or the investments of any fund, as the occurrence of these events and the results of a fund are subject to various risks and uncertainties. The actual portfolio, and thus results, of a fund may differ substantially from those assumed in the forward looking statements. The opinions expressed reflect the advisor’s best judgment at the time this presentation was issued, and the advisorr and its affiliates will not undertake to update or review the forward looking statements contained in this presentation, whether as a result of new information or any future event or otherwise.
The advisor’s judgments about the growth, value or potential appreciation of an investment may prove to be incorrect or fail to have the intended results, which could adversely impact a Fund’s performance and cause it to underperform relative to other funds with similar investment goals or relative to its benchmark, or not to achieve its investment goal.
There is no assurance that these opinions or forecasts will come to pass, and past performance is no assurance of future results.
There is a risk that issuers and counterparties will not make payments on securities and other investments.
Glossary:
Bloomberg Commodity TR Index – designed to be a highly liquid and diversified benchmark for commodity investments.
Bloomberg US Aggregate Bond TR Index – A market capitalization-weighted index that is designed to measure the performance of the U.S. investment grade bond market with maturities of more than one year.
BRICS – an intergovernmental organization comprised of ten countries: Brazil, Russia, India, China, South Africa, Egypt, Ethiopia, Indonesia, Iran and the United Arab Emirates.
Commodities – a basic good used in commerce that is interchangeable with other commodities of the same type. Investors and traders can buy and sell commodities directly in the spot (cash) market or via derivatives such as futures and options.
Credit Spreads – The difference in yield (return) between two debt instruments of the same maturity but with different credit ratings, reflecting the additional risk investors take on when lending to a borrower with a lower credit rating.
Currencies – money in the form of paper and coins that’s used as a medium of exchange. Currencies are created and distributed by individual countries around the world.
MSCI EAFE Gross TR USD Index – a broad market equity index that tracks the performance of large and mid-cap companies in 21 developed markets around the world, excluding the US and Canada.
S&P 500 TR Index – A market capitalization-weighted index that is used to represent the U.S. large-cap stock market.
20250702-4633644
Explore Catalyst Funds | Explore Rational Funds
Data Source: Bloomberg LP and Catalyst Capital Advisors LLC. Based on monthly return data from 12/31/1999 to 12/31/2024. Stocks are represented by the S&P 500 TR Index; bonds are represented by the Bloomberg US Aggregate Bond Index; Balanced Risk Strategy is represented by 100% notional exposure to SG CTA Trend Index, 50% allocation to the S&P 500 and a 50% allocation to the Bloomberg US Short Treasury TR Index (to represent collateral for futures program). Rebalanced monthly. Past performance does not guarantee future results. See important disclosures at the end of this presentation, including with respect to the limitations inherent to hypothetical performance comparisons.
Even before November’s post-election rally, Wall Street was growing increasingly worried that the stock market was starting to get ahead of itself.
Advisory services are offered through Catalyst Capital Advisors LLC, Catalyst international Advisors LLC and Rational Advisors, Inc., each a registered investment adviser. Registration does not imply a certain level of skill or training. The information contained on this website is provided for informational purposes only and should not be construed as investment, legal or tax advice. Nothing on this website constitutes an offer to sell or a solicitation of an offer to buy any security or investment product. Investments involve risk, including possible loss of principal. Past performance does not guarantee future results. Investors should consider the investment objectives, risks, charges, and expenses of any Fund carefully before investing. Please read the prospectus and summary prospectus carefully before investing. Products and services may not be available in all jurisdictions or to all investors. Information obtained from third-party sources is believed to be reliable but is not guaranteed as to accuracy or completeness.