When the Noise Becomes the Signal
The range of macro outcomes remains wide, even as recent developments suggest a near-term easing of immediate escalation risk. Iran’s posture appears less about outright resistance and more about conditional engagement, particularly around the Strait of Hormuz. While this reduces the probability of an outright disruption in the near term, it preserves a meaningful energy risk premium and keeps the option of future stress events intact. That distinction matters. It tempers global demand expectations at the margin while leaving largely intact the secular capex cycle tied to AI and computing infrastructure. It may also suggest a relative floor under U.S. activity given energy independence, but a more fragile backdrop for the cyclical broadening investors had been anticipating.
Higher energy prices, even without 1970s-style shortages, reallocate consumption toward essentials and away from discretionary demand. That dynamic complicates the Fed’s path, particularly as market-implied policy expectations, as reflected in Fed Funds futures, have shifted from pricing multiple cuts to effectively none. At the same time, Treasury financing needs remain elevated, with deficit funding and rolling over the debt contributing to upward pressure on term premia and reinforcing bond market volatility.
Layered onto this is a growing awareness of private credit vulnerabilities. While not yet systemic, the combination of elevated rates, tighter liquidity, and less frequent disclosure, model-based valuations, and more variable covenant structures introduces an additional source of potential instability in some segments of the market, particularly if economic conditions soften.
Against this backdrop, we are not making a directional call. We believe larger cap, structurally supported AI-linked names may prove more resilient than smaller, cyclical, and rate-sensitive exposures based on current conditions, but dispersion, rather than outright leadership, is likely to define the environment.
The first quarter reinforced many of these dynamics. Broad equity indices declined even as realized volatility remained relatively contained, while implied volatility and correlation signals moved higher. That divergence highlighted how quickly positioning can shift beneath the surface and how fragile diversification becomes as correlations expand.
There is a growing tendency to look through the noise for the signal. But what if the noise is the signal? The persistence of episodic repricing, shifting correlations, and unstable positioning suggests that volatility itself is not a distraction from the market narrative, but increasingly the narrative itself.
The more durable observation, and one we have emphasized for over six months, is that volatility can be viewed as an underappreciated source of opportunity. Markets are increasingly driven by episodic repricing, unstable correlations, and rapid shifts in positioning. Our internal models, which are subject to limitations and based on historical relationships, including those that track the behavior of safety assets relative to equities, continue to signal elevated correlation risk and a reduced diversification benefit.
In that environment, the opportunity is not simply to own risk or avoid it, but to navigate the range of outcomes markets are now consistently delivering. This is not a call to step away from long-term equity participation, but to complement it with strategies that engage volatility more intentionally rather than relying on static allocations in a more dynamic regime.
IMPORTANT INFORMATION
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As of December 31, 2025, Easterly Asset Management and its Strategic Partners had $3.4B in managed assets which includes over $3.0B in assets under management and administration of Easterly Investment Partners LLC, an SEC registered investment adviser. Easterly Snow and Easterly Ranger are investment teams of Easterly Investment Partners LLC. EAB Investment Group LLC (d/b/a Easterly EAB) and Orange Investment Advisors LLC (d/b/a Easterly Orange) 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 affected.
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. Performance data quoted represents past performance. Past performance is not indicative of future results. The investment return and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. All results are historical and assume the reinvestment of dividends and capital gains. Performance shown reflects contractual fee waivers. Without such waivers, total returns would be reduced. Please click here to view standardized performance for the Fund.
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.
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This commentary represents the views of the author as of the date published and is subject to change without notice. The information provided is for informational purposes only and should not be construed as investment advice or a recommendation to buy or sell any security.
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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