Easterly EAB - Macro Insights: 12/9/25 - Easterly Asset Management

Trillion-Dollar Bets: Boards, Balance Sheets, and America’s New Growth Engine

At our firm, we have always believed that trying to predict the Federal Reserve’s (Fed’s) next move or arguing over market valuations often distracts from what really matters for investors. Not every portfolio is built to withstand the full roughness of the ride, and not every investor cares only about the final destination. Volatility, path dependency, and shifting correlations matter just as much as the ultimate return number. That is why we focus on the underlying forces (technology, productivity, capital allocation, positioning, and geopolitics) that shape a market’s performance characteristics over investment cycles.

The current artificial intelligence (AI) infrastructure super-cycle is one of those rare, decisive forces that fundamentally changes the investment calculus. The projected $1.5–2.5 trillion AI build-out through 2030 represents a true super-cycle. Yet it is important to recognize the implications: because the sums involved are so large, every major commitment now requires full board approval – not simply CEO authorization. These decisions are permanently reshaping corporate balance sheets through higher debt, substantial future depreciation, and cash that will remain tied up for years.

After three decades defined by a “return cash to shareholders” mindset, corporate America has quietly reverted to the 1950’s–60’s playbook of “plow everything into growth.” And once the contracts are signed for custom silicon, new power plants, and continent-scale data centers, there is, in our view, very little opportunity to reverse course for at least three to five years.

This is not to say that every dollar will be well spent. However, the scale and momentum of this cycle are likely to be disruptive and self-reinforcing, generating positive economic effects across a wide range of sectors in the near to medium term.

Why This Is Secular and Not Just Another Cycle

Scale and impact matter.

A real productivity surge: AI is already boosting output per worker 10–40% across many tasks. At the economy-wide level, we believe it can add roughly 1% to real GDP growth annually for a decade.
Board-level commitment signals conviction and raises the stakes: The magnitude of these investments and the breadth of the resulting build-out extend the review horizon and meaningfully increase the risks for laggards.
Clear U.S. leadership: The United States controls the leading chips, models, cloud platforms, and the majority of new power contracts. We are not arguing the U.S. is the only game, but its leadership position is dominant.
Macro Implications: These forces support stronger growth and therefore a modestly higher “normal” range for inflation and interest rates. The Fed will not be able to cut as deeply as markets may prefer.

What It Means for Investors & Advisors

Focus matters, but not at the expense of volatility sensitivity. Bigger stakes can lead to bigger costs.

U.S. dominance tempers the case for aggressive foreign diversification. This may sound contrarian in a moment of foreign-led performance, but if U.S. AI is as durable as we believe, U.S. markets should once again outperform.
Concentrated indices may persist longer than is comfortable. There will be a natural tendency to overweight domestic AI leaders and enablers such as hyperscalers, semiconductors, utilities and industrials, making diversification more challenging. Approaches like our hedged equity strategy that actively adjust market exposure to maintain participation while protecting against downside risk, can offer accessible and sensible diversification.
Concentrated indices may persist longer than is comfortable. There will be a natural tendency to overweight domestic AI leaders and enablers such as hyperscalers, semiconductors, utilities, and industrials, making diversification more challenging. Approaches like our hedged equity fund (JDIEX) that actively adjust market exposure to maintain participation while protecting against downside risk, can offer accessible and sensible diversification.
If the thesis is correct, short pullbacks such as November’s healthy digestion will likely represent buying opportunities, not the start of a downturn. A longer bull cycle, uncomfortable for bears, may continue what has been called one of the least loved U.S. rallies in recent memory.
Take advantage of structurally higher volatility through approaches that actively use market swings to create resilience. We expect markets to swing more sharply as the Fed keeps rates higher and Big Tech takes on more debt. Stocks are simply more sensitive to market moves than they were in the low-rate, cash-rich years of 2015–2021.
- 2025 – mid-2026: Expect continued peak spending announcements. As long as these persist, the self-reinforcing process remains intact.
- 2027 onward: Clear utilization, cash returns, and visible separation of winners from losers will need to appear. The recent dip looked to us as normal profit-taking, not a “show me the money” demand on AI. Bubble concerns are understandable but still early. The real evidence will come in 2027–2028 when cash flows reveal who built wisely and who did not.
Resilience remains essential. Given the scale of investment, if unintended or unexpected events do occur, investors will be well served to have resilience in the form of strategies capable of handling declines and volatility spikes built into their portfolio, even amid strong secular tailwinds.

In this new regime of higher Big Tech leverage, structurally elevated volatility, and a less-dovish Fed, our hedged equity strategy offers a disciplined approach that can help support portfolio stability. It captures equity-like returns in calm markets yet can systematically reduce beta and drawdowns if the AI super-cycle turns rough, allowing investors to stay the course without absorbing the full force of volatility. That balance has rarely been more valuable than it is today.

In this new regime of higher Big Tech leverage, structurally elevated volatility, and a less-dovish Fed, we believe the Easterly Hedged Equity Fund (JDIEX – I share class (offers a disciplined approach that can help support portfolio stability. It is designed to capture equity-like returns in calm markets while systematically reducing beta and drawdowns if the AI super-cycle turns rough, which can allow investors to stay the course without absorbing the full force of volatility; that balance has rarely been more valuable than it is today.

Easterly Hedged Equity Fund(JDIEX)

IMPORTANT INFORMATION

As of 3/31/2025, Easterly Asset Management (“Easterly”) and its Strategic Partners have $4.2B in managed assets which includes nearly $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.

The indices cited are, generally, widely accepted benchmarks for investment performance within their relevant regions, sectors or asset classes, and represent non managed investment portfolio. It is not possible to invest directly in an index..

This communication may contain forward-looking statements, which reflect the views of Easterly and/or its affiliates. These forward-looking statements can be identified by reference to words such as “believe”, “expect”, “potential”, “continue”, “may”, “will”, “should”, “seek”, “approximately”, “predict”, “intend”, “plan”, “estimate”, “anticipate” or other comparable words. These forward-looking statements or other predications or assumptions are subject to various risks, uncertainties, and assumptions. Accordingly, there are or will be important factors that could cause actual outcomes or results to differ materially from those indicated in these statements. Should any assumptions underlying the forward-looking statements contained herein prove to be incorrect, the actual outcome or results may differ materially from outcomes or results projected in these statements. Easterly does not undertake any obligation to update or review any forward-looking statement, whether as a result of new information, future developments or otherwise, except as required by applicable law or regulation.

Past performance is not indicative of future results.

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RISKS & DISCLOSURES

Investors should carefully consider the investment objectives, risks, charges and expenses of the Fund. This and other important information about the Fund is contained in the prospectus which should be read carefully before investing and can be obtained by visiting funds.easterlyam.com or by calling 888-814-8180.

The Easterly funds are distributed by Easterly Securities LLC, member FINRA/SIPC. Easterly Investment Partners LLC is an affiliate of Easterly Securities LLC. Orange Investment Advisers, LLC and EAB Investment Group, LLC are not affiliated with Easterly Securities LLC.

Easterly Investment Partners LLC is the investment adviser to the Easterly mutual funds. 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.

Not FDIC Insured–No Bank Guarantee–May Lose Value.

IMPORTANT FUND RISK

There is no assurance that the Fund will achieve its investment objective. The Fund share price will fluctuate with changes in the market value of its Fund investments. Mutual Funds involve risk including possible loss of principal. Leveraging investments, by purchasing securities with borrowed money, is a speculative technique that increases investment risk while increasing investment opportunity. Derivatives may be volatile and some derivatives have the potential for loss that is greater than the Fund’s initial investment. If the Fund sells a put option, there is risk that the Fund may be required to buy the underlying investment at a disadvantageous price. If the Fund sells a call option, there is risk that the Fund may be required to sell the underlying investment at a disadvantageous price. Shares of ETF share many of the same risks as direct investments in common stocks or bonds. Because a large percentage of the Fund’s assets may be invested in a limited number of issuers, a change in the value of one or a few issuers’ securities will affect the value of the Fund more than would occur in a diversified fund.

Diversification does not guarantee a profit nor protect against loss in any market.

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Perspective