The Macro View: As U.S. Growth Slows, Is a Soft Landing in Sight?

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

The U.S. economy is gradually slowing from the strong post-pandemic expansion, with GDP growth expected to moderate in the fourth quarter as tighter financial conditions and the lagged impact of Federal Reserve policy filter through. Consumer spending has remained resilient but is beginning to cool, particularly in discretionary areas, as households continue to draw down excess savings accumulated during the pandemic.

Evaluating the Fed’s Next Steps
The Federal Reserve remains in a delicate balancing act. Inflation has eased substantially from its peak but is still running above the Fed’s 2% target, particularly in services and shelter costs. While markets are anticipating the possibility of at least one additional rate cut by year-end, the Fed continues to signal a “higher for longer” stance. Policymakers are increasingly focused on loosening, however, suggesting risks are shifting toward gradual easing if inflation continues to trend lower.

Headline CPI is expected to move lower into year-end, helped by base effects, softer goods pricing, and moderating wage growth. Still, sticky components such as shelter and services inflation remain persistent, keeping the Fed cautious. Meanwhile, the labor market, though strong, is showing early signs of cooling with slower payroll growth, rising jobless claims, and easing wage pressures. This more balanced labor environment lowers the risk of a near-term recession but reinforces the broader narrative of deceleration.

On the markets side, corporate earnings are showing signs of modest reacceleration after a shallow earnings recession earlier this year, with technology and communication services leading the rebound. Equity valuations, however, remain elevated relative to history, leaving stocks susceptible to bouts of volatility if growth disappoints. In fixed income, Treasury yields may
stabilize or drift lower as growth moderates and markets look ahead to eventual Fed cuts. Credit spreads remain tight, but higher-quality bonds appear increasingly attractive given late-cycle dynamics.

The Global Slowdown
Globally, Europe continues to struggle with sluggish manufacturing activity, while China’s growth remains underwhelming despite additional policy support. Geopolitical risks from energy shocks to conflicts abroad and the early stirrings of U.S. election season add further layers of uncertainty that could drive market swings.

The Big Picture
Overall, the economy appears to be moving toward a soft-landing scenario: slower but still positive growth, with inflation gradually trending lower.
Risks remain two-sided – a sharper slowdown could force the Fed to ease more quickly, while sticky inflation could delay policy cuts.

Investors should prepare for continued volatility but also potential opportunities, particularly in quality equities and income-generating assets that can weather a late-cycle environment.

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: Climbing the Wall of Worry

By Joe Tigay, Chief Trading Officer, Equity Armor Investments.

As we close the books on the third quarter of 2025, equity markets have once again defied skeptics with a robust performance that underscores the enduring power of technological innovation and accommodative monetary conditions. The quarter’s strength was anchored by the relentless momentum of Artificial Intelligence (AI) and mega-cap technology stocks, whose earnings trajectories continue to exceed even bullish expectations. Yet as we turn our attention to the final quarter of the year, investors must navigate an increasingly complex landscape where opportunity and uncertainty exist in delicate balance.

The third quarter’s rally was no accident. Beyond the AI narrative, which has captivated markets for nearly two years, lies a more fundamental driver: persistent liquidity. Despite official communications around quantitative tightening, the practical reality is that global central banks, led by the Federal Reserve, have maintained an accommodative stance that continues to channel capital into risk assets. This liquidity backdrop has proven decisive, steering flows away from traditional safe havens and cash equivalents toward equities that promise growth and innovation. The pattern is familiar and has repeated itself across recent quarters – when money remains abundant and inexpensive, markets climb.

Looking ahead to Q4, several critical questions demand attention. Foremost among them is the specter of inflation. While price pressures have moderated from their recent peaks, the underlying economic stability we’re experiencing could paradoxically reignite inflationary pressures through commodity price increases or wage acceleration. Our assessment suggests the Federal Reserve will maintain its current policy bias, prioritizing employment stability over preemptive rate hikes. This focus on the labor market component of the Fed’s dual mandate provides a constructive backdrop for continued equity appreciation, provided inflation metrics remain cooperative. Any meaningful re-acceleration in prices, however, would immediately challenge this benign scenario and force a rapid reassessment across asset classes.

Investors Should Beware of Potential Heightened Volatility
Our central thesis for the fourth quarter is that markets will continue their ascent while simultaneously experiencing heightened volatility, a phenomenon we describe as climbing the “wall of worry.” This expectation represents a notable departure from consensus thinking. Historically, rising equity prices and elevated volatility are inversely correlated; investors typically see low volatility during bull markets and vice versa. Yet current conditions suggest this relationship may break down. With the VIX trading near the lower end of its post-pandemic range despite elevated valuations, we believe the market is underpricing risk.

As stocks push higher into year-end, investors will inevitably demand greater compensation for holding risk, manifesting as sharper intraday swings and more frequent corrections even as the broader trend remains positive.

How We’re Positioned: High on Large Cap Tech and AI
This outlook informs our positioning strategy in our own portfolios. Rather than making binary directional bets, we’ve constructed a portfolio designed to perform across multiple market states, what we term being “covered both ways.” This approach allows us to participate fully in continued market advances while simultaneously benefiting from volatility spikes that would challenge more conventional long-only strategies. In an environment where complacency has been periodically punished, such flexibility is essential.
From a sector perspective, we remain constructive on Large-Cap Technology and the core AI infrastructure companies that have led this cycle. More compelling, however, is the broadening of AI adoption beyond hardware and chip manufacturers into the enablers and application layers across diverse industries. The next phase of this mega-trend will reward companies that successfully monetize AI capabilities rather than merely those building the foundational technology. Additionally, select opportunities within the Russell 2000 are emerging, representing smaller companies poised to become tomorrow’s growth engines.

The Verdict: Cautious Optimism in Equity Markets
As we navigate the final quarter of 2025, our stance is one of measured optimism grounded in fundamental drivers. The combination of persistent liquidity, technological leadership, and reasonable policy accommodation creates a supportive environment for equities over both the near-term and the next one to two years. However, success will require acknowledging and preparing for the increased volatility that inevitably accompanies markets at elevated valuations.
The wall of worry remains formidable, but history suggests it’s worth climbing.

Equity Armor sub-advises the Rational Equity Armor Fund (HDCTX) and the Catalyst Nasdaq-100 Hedged Equity Fund (CLPFX).

Fixed Income Outlook: Carry Opportunities, Tight Valuations, and Navigating Macro Risks Through Quality Credit Selection

By Dwayne Moyers, President and Chief Investment Officer, SMH Capital Advisors, LLC.

Fixed income markets posted solid results this past quarter, driven largely by monetary policy shifts and strong investor demand. The Bloomberg U.S. Aggregate Index and the High Yield Index both saw returns of more than 2% for the quarter. The Federal Reserve’s 25 basis point rate cut in September anchored short-term yields, while long-term yields rose modestly on deficit and supply concerns, steepening the curve.

Credit spreads in both investment grade and high yield tightened, supported by healthy corporate earnings, strong balance sheets, and modest net supply. Treasury performance was mixed with shorter maturities benefiting from policy expectations, while the long end faced pressure from higher term premiums. For instance, the 10-year Treasury came close to a -2% total return and the 30-year came close to a -1% total return.

Overall, credit markets delivered strong carry and spread-driven returns. However, valuations are increasingly tight, long-duration Treasuries remain vulnerable, and macro risks include inflation trends, fiscal deficits, and tariff uncertainty, which are likely to continue to shape performance. Quality credit selection will be the determining factor for producing very favorable returns. Worries in the private credit market with the recent blow ups and frauds with TriColor and First Brands have cast more doubt in the private credit markets.

Entering Q4, fixed income markets face several unresolved macro questions. Chief among them is the trajectory of inflation and how it shapes the Federal Reserve’s policy path. While one to two additional rate cuts remain likely this year, the pace will hinge on whether disinflation continues or stalls. The yield curve is expected to steepen further as front-end rates decline, and long-end yields remain pressured by heavy Treasury issuance, fiscal deficits, and elevated term premiums.

Growth is slowing, and the balance between a soft landing and a mild recession remains uncertain. Credit spreads, already tight, leave little room for further compression. Performance will therefore be driven more by carry than by spread tightening.

The Fixed Income Takeaways:
Quality and selectivity will matter: corporates and recession defensive sectors should fare better, while cyclical industries and weaker credits may face pressure.
Key risks include sticky services inflation, expanded tariffs, fiscal policy uncertainty and civil unrest. Global dynamics, including policy divergence across central banks and capital flow shifts, could add further market noise.

In summary, the quarter ahead is likely to reward higher-quality credit exposure, moderate duration, and careful sector allocation. Upside from spreads is limited, but steady income opportunities remain in corporate bonds, and selective high yield.

Mr. Moyer is a Portfolio Manager on the Catalyst/SMH High Income Fund (HIIIX) and the Catalyst/SMH Total Return Income Fund (TRIIIX)

Q4 Spotlight: How Trend Following Can Continue its Comeback

By Martin Lueck, Co-Founder and Director of Research, and Iain Cameron, Senior Investment Solutions, Aspect Capital.

Why Was Early 2025 Challenging for Trend Following? What is Behind the Recovery?
Strategies that rely on quantitative trend signals and machine-learning techniques were caught by abrupt, policy-driven reversals in early April. The tariff announcement jolted positioning across currencies, equities, and certain commodities, producing sharp reversals that penalized pre-event exposures for trend strategies. The systematic models adapted quickly to the new price information, but prices reversed again, whipsawing the emerging trends. Meanwhile, several markets, most notably government bonds and parts of the energy complex, spent long stretches in range-bound, directionless price-patterns, a difficult backdrop for trend systems.

We described Q2’s difficult market pattern as akin to an aircraft hitting turbulence: sudden, aggressive air pockets force a course-correction until cleaner air reappears. Trend programs behave similarly, actively seeking “clean air” in the form of persistent price trends, and by Q3, the air did improve. Equities re-accelerated, supported by ongoing AI-related productivity enthusiasm, and managed futures strategies captured the upwards move across not just U.S. markets, but Asian and European indices as well. Select commodities like cattle and gold also offered substantial opportunities, reenforcing the benefit of investing in a diversified multi-asset portfolio.

Why We Are Optimistic for Trend Strategies from Here
We believe five key macroeconomic forces might cause dramatic shifts in markets; we have called them the 5 D’s of global change.

1) Decarbonization
Accelerating clean-energy investment is reshaping commodity demand curves. But different countries are moving at different speeds: China has pivoted rapidly toward EVs and solar, while others are transitioning more gradually, creating breadth and dispersion across commodities. On the near-term horizon is the growth of AI. Equity markets have been propelled higher by AI-induced euphoria. But have markets overlooked the energy demands of the AI revolution? Generation and storage capacity need to catch up, with potential knock-on trend opportunities in fuels and metals.

2) De-dollarization
The U.S. dollar was one of the biggest movers in H1. Sentiment surrounding its ability to be the global reserve currency has soured. Irrespective of whether it’s permanent or not, we expect to see flows to other G10 currencies and therefore opportunities in FX markets. The strong bull market in gold has also been a by-product of the de-dollarization effect. Gold behaved similarly in the 1970s, a decade characterized by geopolitical unrest and repeated bouts of inflation.

3) Defense Spending
NATO countries are being held accountable to their pledges. We have seen many dramatically increase their spending on defense and rearmament. This process is expensive, it could be pro-growth, it could have a similar effect on inflation, we will wait and see. What we know is that it will involve commodity markets.

4) Deglobalization
Post-pandemic supply-chain rewiring, tariff frictions, and ‘friend-shoring’ are fragmenting market microstructures. As production and sourcing regionalize, assets in different blocs might begin to behave differently, increasing geographical dispersion and potentially creating multiple, separate asset class trends.

5) Demographics
This one will play out over a longer time horizon. The composition of societies is changing; retirement portfolios need to change with them. Aging populations and shifting dependency ratios imply longer working lives and a longer need for growth-tilted portfolios. Bonds can’t be relied on as much and alternatives should be explored, but people will need liquidity. People are living longer and fertility rates are declining, but life still happens – liquidity should always be valued.

Overall, trend following is built for change, not stasis. After a whipsaw-heavy Q2, the return of directional moves in Q3 shows how quickly managed futures can re-engage when flows re-align. We expect the “5 Ds” to keep macro dispersion elevated into 2026 and beyond, providing strong tailwinds for a diversified multi-asset trend programme.

Aspect Capital is the sub-advisor to the Catalyst/Aspect Enhanced Multi-Asset Fund (CASIX).

IMPORTANT RISK 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 THE 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 AND 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 the resulting high portfolio turn-over may expose such funds to additional risks that they would not be subject to if they invested directly in the securities and commodities underlying those derivatives. These funds may experience losses that exceed those experienced by funds that do not use futures contracts, options and 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 the liquidity of certain investments could affect a fund’s overall performance. Other risks include U.S. Government securities risks and investments in fixed income securities. Typically, a rise in interest rates causes a decline in the value of fixed income securities or derivatives owned by a fund. Furthermore, the use of leverage can magnify the potential for gain or loss and amplify the effects of market volatility on a fund’s share price. All funds are subject to regulatory change and tax risks; changes to current rules could increase costs associated with an investment in a fund.

The value of a fund may decrease in response to the activities and financial prospects of an individual security or group of securities held in a fund’s portfolio. Investments in foreign securities could subject a Fund to greater risks, including currency fluctuation, economic conditions, and different governmental and accounting standards. A fund’s portfolio may be focused on a limited number of industries, asset classes, countries or issuers. Certain funds may invest in high yield or junk bonds, which present a greater risk than bonds of higher quality. Other risks may include credit risks and interest rate risk, particularly with respect to floating rate loan funds. Changes in short-term market interest rates will directly affect the yield on the shares of a fund whose investments are normally invested in floating rate debt. Floating rate loan funds tend to be illiquid, and a fund might be unable to sell the loan in a timely manner as the secondary market is generally a private, unregulated inter-dealer or inter-bank re-sale market.

Any or all of the foregoing risk factors may affect the value of your investment.

The views expressed herein are as of June 30, 2025, and represent a general guide to the perspectives of the authors. The information and opinions contained in this document have been compiled or arrived at based on sources believed to be reliable and in good faith; however, no representations or warranties of any kind are intended or should be inferred with respect to the accuracy of the information contained herein or the economic return of an investment in a fund, and no assurance can be given that existing laws will not be changed or interpreted adversely. All such information and opinions are subject to change without notice.

Some of the statements in this presentation may contain or be based on forward looking statements, estimates, targets or prognoses (collectively, “forward looking statements”), which reflect the advisor’s current view of future events, economic developments and financial performance. Such forward looking statements are typically indicated by the use of words which express an estimate, expectation, belief, target or forecast. Such forward looking statements are based on an assessment of historical economic data, on the experience and current plans of the advisor and/or certain of its advisors, and on the indicated sources. These forward looking statements contain no representation or warranty of whatever kind that such future events will occur or that they will occur as described herein, or that such results will be achieved by any fund or the investments of any fund, as the occurrence of these events and the results of a fund are subject to various risks and uncertainties. The actual portfolio, and thus results, of a fund may differ substantially from those assumed in the forward looking statements. The opinions expressed reflect the advisor’s best judgment at the time this presentation was issued, and the advisorr and its affiliates will not undertake to update or review the forward looking statements contained in this presentation, whether as a result of new information or any future event or otherwise.

The advisor’s judgments about the growth, value or potential appreciation of an investment may prove to be incorrect or fail to have the intended results, which could adversely impact a Fund’s performance and cause it to underperform relative to other funds with similar investment goals or relative to its benchmark, or not to achieve its investment goal.
There is no assurance that these opinions or forecasts will come to pass, and past performance is no assurance of future results.

There is a risk that issuers and counterparties will not make payments on securities and other investments.

Glossary:
Bloomberg Commodity TR Index – designed to be a highly liquid and diversified benchmark for commodity investments.

Bloomberg US Aggregate Bond TR Index – A market capitalization-weighted index that is designed to measure the performance of the U.S. investment grade bond market with maturities of more than one year.

Commodities – a basic good used in commerce that is interchangeable with other commodities of the same type. Investors and traders can buy and sell commodities directly in the spot (cash) market or via derivatives such as futures and options.

Credit Spreads – The difference in yield (return) between two debt instruments of the same maturity but with different credit ratings, reflecting the additional risk investors take on when lending to a borrower with a lower credit rating.

Currencies – money in the form of paper and coins that’s used as a medium of exchange. Currencies are created and distributed by individual countries around the world.

MSCI EAFE Index – a broad market equity index that tracks the performance of large and mid-cap companies in 21 developed markets around the world, excluding the US and Canada.

S&P 500 TR Index – A market capitalization-weighted index that is used to represent the U.S. large-cap stock market.

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