Less Is More
John Lekas – CEO & Senior Portfolio Manager
March 12th, 2026
Markets entered the year expecting interest rate cuts from the Federal Reserve. Instead, we are seeing a different picture emerge globally. Both Australia and the European Union are preparing to raise interest rates, underscoring a reality we have emphasized for the past several years: inflation is a difficult force to eliminate once it becomes embedded in the economy.
Initially, inflation manifested primarily through wage pressures. Today, we are increasingly seeing price inflation across the broader economy. Recent geopolitical developments in the Middle East, combined with a relatively weak dollar policy, have further intensified these inflationary pressures.
Markets have recently experienced increased volatility, particularly within private credit. Much of the recent damage has occurred within the software sector. In our view, the magnitude of this decline appears overdone, and we believe that attractive buying opportunities may soon emerge for long-term investors as fundamentals stabilize. Recent research from Morgan Stanley suggests the current stress is more likely a repricing of risk rather than the beginning of a systemic credit crisis.
Credit spreads have widened by approximately 50 basis points YTD in both high-yield and investment-grade markets. However, the CLO market—particularly new issuance rated BBB and above—remains relatively tight. Overall, both high-yield and investment-grade credit spreads continue to appear compressed relative to underlying risks.
High Yield Credit Spread
Investment Grade Credit Spread
Our guiding principle remains straightforward: less is more. Maintaining discipline and avoiding excessive risk allows investors to take advantage of opportunities when markets temporarily overshoot to the downside.
- The High Quality Fund will remain tightly positioned.
- The High Yield Fund is managed with the objective of generating income consistent with BB+ credit quality and low duration.
Our current expectations for rates in 2026:
- 10-Year Treasury Yield: 4.5%
- 30-Year Treasury Yield: 6.0%
- Federal Reserve Policy: Uncertain; rate cuts or hikes remain possible
Overall, we expect elevated volatility throughout 2026 as markets continue to navigate inflation dynamics, geopolitical uncertainty, and evolving monetary policy. In a worst-case scenario, the VIX potentially could revisit its April 2025 highs in the 60s range.
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