The Macro View: Late-Cycle Resilience Highlights the Importance of Quality, Flexibility, and Selectivity

By David Miller, Co-Founder and Chief Investment Officer, Catalyst Capital Advisors LLC and Rational Advisors, Inc.

Macro Outlook
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.

Economic Growth
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
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.

Monetary Policy
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.

Financial Markets
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.

Key Risks
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.

Bottom Line
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).

Equity Outlook: Keeping an Eye on the Growing Tails of Equity Risk

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.

Looking to 2026
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:

• The potential to match or exceed the S&P 500 over long
  periods
• Demonstrated risk mitigation during equity declines
• Sufficient liquidity to capitalize on opportunities that arise in crises

Mr. Shen is a Portfolio Manager for the Rational/RGN Hedged Equity Fund (RNEIX).

Fixed Income Outlook: Quiet Strength Beneath the Noise

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.

Macro Review: Resilience With Anxiety

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.

Credit Review: Quiet Strength Beneath the Noise

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.

Macro Outlook: More Non-Consensus Outcomes Ahead?

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.”

Credit Outlook: Carry, Dispersion, and Convergence

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.

Conclusion: Why Credit Now

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).

Q1 Spotlight: Familiarizing Yourself with Insider Buying

By Charles Ashley, Portfolio Manager, Catalyst Capital Advisors

Intro to Insider Buying

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.

What the Team Looks For

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.

Expectations for Insider Buying in Q1

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.

Examples and Reading the Signs

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.

Navigating the Current Bull Market

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).

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 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.

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 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.

Glossary

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.

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