Navigating the Markets through a Summer Filled
with Deadline Drama
With a series of political and policy deadlines looming in early July, markets face significant uncertainty. The current macro scenario revolves around a complex cocktail of budget events and the arrival of more congenial tariff agreements. While overnight, a U.S. trade court ruled against many of the administration’s tariffs, the impact and staying power of that news is unclear and, ironically, may only add to uncertainty. The Senate’s July 3 budget reconciliation “soft” deadline and the July 9 expiration of postponed European Union (EU) tariffs will help shape fiscal and trade outcomes. Passing a responsible budget by July 3 and securing tariff concessions by July 9 would cap yields, lift cyclicals, and clear the Federal Reserve’s (FED) path. The recent FED minutes made clear the fact that a lack of policy clarity leaves the committee in a wait and watch mode. With the GDP data starting to show the likelihood of two consecutive Quarter-over-Quarter (QoQ) negative prints, the FED meets in late June and again in late July. Investors have trimmed rate-cut expectations to 1–2x this year. In this more deficit-sensitive environment, U.S. Treasury yields have retraced recent lows, and higher rates threaten to stall capital-goods orders and equities in general.
Financial commentators and markets want the U.S. budget process to balance fiscal discipline with growth-oriented spending, targeting around $6.8 trillion for FY 2025 while addressing a $1.9 trillion deficit. Of course, there is concern about rising debt (projected to reach 122% of GDP by 2034) and urgency to tighten budgets to avoid a fiscal crisis. However, there’s strong support for increased investment in infrastructure and technology, like AI, to boost productivity and maintain competitiveness. The focus is on smart, targeted spending rather than just a larger budget. Fixed income sectors such as Emerging-market and high-yield bonds would also feel pressure under higher yields and a recovery of the Dollar. Meanwhile, cyclical equities—from industrials to financials—are vulnerable to tariff disappointments, a stalled budget process, and tax-credit–dependent sectors like renewables remain very exposed to fiscal austerity calls. In a summer defined by political deadlines and policy risks, the importance of positioning for a wide range of potential outcomes cannot be underestimated. As investors and advisors consider that reality constant and broad diversification — such as that offered by risk adjusted return-oriented funds like the Easterly Hedged Equity Fund (JDIEX) — can help portfolios navigate potentially choppy markets.
Fiscal & Trade Catalysts: This is what the markets are primarily focused on.
- July 3: Senate aims to finish reconciliation before recess. Ideally that allows for a smoother process into formal passage and sub-committee work prior to summer recess.
- July 9: Deferred EU tariffs are set to resume.
- August 12: China tariffs deferred until this date.
Monetary Policy Outlook: While tariffs and the budget are important, cyclical stocks need financial relief.
- The European Central Bank (ECB) may ease at the June 5th meeting and is slated to ease more in basis points than the FED this year.
- FED meetings in late June and July; markets price only 1–2 rate cuts this year, reflecting greater uncertainty and higher yields.
Fixed-Income Risks: Deficit risks are being seen in the U.S. but don’t ignore Japan’s bond market.
- U.S. Treasury yields have rebounded; long-duration bonds face range-bound trading or potential losses.
- Emerging-market and high-yield bonds are pressured by a firmer dollar, elevated yields, and lack of FED easing.
Equity Vulnerabilities: With valuations at these levels the market is calling for good news.
- Cyclicals (industrials, financials) can underperform if tariffs stay in place, the budget fails, or the FED waits longer before easing.
- Sustainable sectors like renewable energy risk credit changes if fiscal austerity gains traction.
Diversification Imperative: volatility and correlations have been dropping but don’t be lulled into complacency.
- Yields at elevated levels don’t necessarily equate to diversification, yet. Bond volatility communicates that the secular bear market for bonds also isn’t over yet.
- In an environment of policy deadlines and rate-sensitive selling, risk adjusted return-oriented strategies—such as JDIEX —can help to provide equity participation, balance and resilience across certain scenarios.
Easterly Hedged Equity Fund(JDIEX)
Important Information
RISKS AND 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), Harrison Street Advisors 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.
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