Perspective

Market Backdrop

The U.S. economy remains in expansion mode, though the transition between policy-driven stimulus and private-sector momentum is uneven. Deregulation and tax cuts are fostering a more dynamic business environment, even as labor data softens and consumer resilience moderates. Inflation, while no longer accelerating, remains sticky enough in our opinion to constrain the Federal Reserve’s (Fed) ability to cut interest rates aggressively. We expect monetary policy at Fed meetings in the next year to remain “up for grabs” with a possibility of only limited rate reductions, likely less than currently priced into futures, suggesting that long-duration yields may stay near current levels. Should this happen, it could continue to create a challenge for investors seeking diversification through fixed income.

Globally, economic divergence persists. Europe continues to face headwinds from the protracted Russia-Ukraine conflict and related energy vulnerabilities, while China-U.S. trade tensions remain a recurring source of uncertainty, particularly for the technology sector. These crosscurrents reinforce our view that volatility will remain slightly elevated as markets adjust to shifting policy and growth expectations.

Productivity and the Capital Expenditure (CapEx) Cycle

We remain constructive on equities supported by the ongoing capital investment boom tied to artificial intelligence and automation. We view this productivity uptrend as still early, perhaps the third or fourth inning, offering structural support for earnings growth. While there will eventually be a prove-it-or-lose-it moment for these high-flyers, that moment is likely several quarters, if not a year away. Sustained CapEx strength underpins valuation confidence, even as higher costs of capital make selectivity more important.

Valuation Discipline, Not Timing

Valuation remains an essential input, but not a reliable timing tool. Despite elevated multiples in certain segments, the persistence of profit growth in key secular sectors argues against broad multiple contraction. We continue to see investors focusing on relative value within durable growth trends rather than attempting to time macro inflection points.

Persistent Volatility and Concentrated Leadership

Unlike prior easing cycles, market leadership may remain more concentrated in sectors benefiting from secular innovation and productivity dynamics. Elevated uncertainty around policy, trade, and geopolitics suggests volatility will persist well into 2026, creating opportunities for strategies designed to balance participation and protection.

Conclusion

Our hedged equity portfolio continues to be structured to capture approximately 50%–80% of the S&P 500 Index’s upside with less than half its volatility. The strategy combines full index exposure with an actively managed hedge overlay designed to limit downside and smooth returns across market cycles. This systematic, non-discretionary process is designed to enable consistent participation in equity markets while mitigating the impact of unexpected shocks.

Our approach remains grounded in total return objectives, disciplined risk control, and long-term participation. Against a backdrop of evolving policy, technological transformation, and persistent uncertainty, our Hedged Equity Strategy remains positioned to capture opportunity while managing volatility. We are always invested, always hedged.

 

Active management. Dynamic protection. Real participation.

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IMPORTANT INFORMATION

© 2025. Easterly Asset Management. All rights reserved.

As of 3/31/2025, Easterly Asset Management (“Easterly”) and its Strategic Partners have $4.2B in managed assets which includes $3B in AUM managed by Easterly’s wholly owned subsidiary, Easterly Investment Partners LLC, a registered investment adviser. Easterly serves as the growth platform for the firm’s asset management business. In 2021, Easterly formed Easterly Clear Ocean to take advantage of opportunities and dislocations in the international shipping markets. In November 2023, Easterly announced a strategic partnership with Lateral Investment Management where Easterly will provide access to its technology, fundraising, and operations expertise, and will invest alongside the firm in certain deals. In October 2024, Easterly acquired the ROC Municipals municipal bond team. EAB Investment Group and Orange Investment Advisors are subadvisors for certain investment strategies and mutual funds offered by Easterly; they are not directly affiliated with Easterly. Easterly Snow, Easterly Murphy, Easterly Ranger and Easterly ROC Municipals are investment teams of Easterly Investment Partners LLC, an SEC-registered investment adviser. EAB Investment Group LLC (d/b/a Easterly EAB), Orange Investment Advisors LLC (d/b/a Easterly Orange), and Lateral Investment Management are separate SEC-registered investment advisers that are strategic partners of Easterly. Each investment adviser’s Form ADV is available at www.sec.gov. Registration does not imply and should not be interpreted to imply any particular level of skill or expertise.

No funds or investment services described herein are offered or will be sold in any jurisdiction in which such an offer or sale would be unlawful under the laws of such jurisdiction. No such fund or service is offered or will be sold in any jurisdiction in which registration, licensing, qualification, filing or notification would be required unless such registration, license, qualification, filing, or notification has been effected.

The material contains information regarding the investment approach described herein and is not a complete description of the investment objectives, risks, policies, guidelines or portfolio management and research that supports this investment approach. Any decision to engage the Firm should be based upon a review of the terms of the prospectus, offering documents or investment management agreement, as applicable, and the specific investment objectives, policies and guidelines that apply under the terms of such agreement. There is no guarantee investment objectives will be met. The investment process may change over time. The characteristics set forth are intended as a general illustration of some of the criteria the strategy team considers in selecting securities for client portfolios. Client portfolios are managed according to mutually agreed upon investment guidelines. No investment strategy or risk management techniques can guarantee returns or eliminate risk in any market environment. All information in this communication has been obtained from sources believed to be reliable but cannot be guaranteed. Investment products are not FDIC insured and may lose value.

Investments are subject to market risk, including the loss of principal. Nothing in this material constitutes investment, legal, accounting or tax advice, or a representation that any investment or strategy is suitable or appropriate. The information contained herein does not consider any investor’s investment objectives, particular needs, or financial situation and the investment strategies described may not be suitable for all investors. Individual investment decisions should be discussed with a personal financial advisor.

Any opinions, projections and estimates constitute the judgment of the portfolio managers as of the date of this material, may not align with the Firm’s opinion or trading strategies, and may differ from other research analysts’ opinions and investment outlook. The information herein is subject to change without notice and may be superseded by subsequent market events or for other reasons. Easterly assumes no obligation to update the information herein.

References to securities, transactions or holdings should not be considered a recommendation to purchase or sell a particular security and there is no assurance that, as of the date of publication, the securities remain in the portfolio. Additionally, it is noted that the securities or transactions referenced do not represent all of the securities purchased, sold or recommended during the period referenced and there is no guarantee as to the future profitability of the securities identified and discussed herein. As a reminder, investment return and principal value will fluctuate.

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Past performance is not indicative of future results.

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