Keeping it Reel

Private credit has transformed from a niche institutional strategy into a $1.7 trillion asset class, increasingly accessible to individual investors through “evergreen” or semi-liquid fund structures. While these funds offer compelling yields compared to traditional bonds, they introduce a unique set of liquidity risks and are propelled by powerful financial incentives for the firms that sell them. This topic has been quite popular of late as news headlines have been filled with concerns over the private loan portfolios of many investment firms, and investors struggling immensely to liquidate their assets in them.

First and foremost, as a reminder to our existing and new clients, I personally write and publish these articles from time to time when I feel it is necessary to communicate my thoughts to you. These have generally come during times of market volatility but also have been delivered at all-time highs. While the monthly market commentary is delivered, I sometimes feel the need to expand upon that with additional thoughts. With that said, I hope you find these valuable.

It’s hard to imagine what we’ve been through as humans and as investors in the last five years. During this period, we endured a global pandemic, 9% inflation, the fastest rate hiking cycle in history, bank failures, and a self-inflicted global trade war. All of these ‘shocks’ I have written about in these publications, which is exactly why this concept was created – to give you a timely perspective when you need it most.

The Nasdaq and Russell 2000 traded decisively in bear market territory and the SP500 briefly reached this level (20% down) last week before aggressively bouncing off its 200-week moving average (an important level that technicians use). For most of our clients this is something that we have been through before and can certainly expect to happen again in the future. Corrections and bear markets happen for a variety of reasons but always resolve to reach all-time highs at some point in the future, even with how uncomfortable they can feel at the time. Most of them we forget even happened.

The long-awaited tariff announcements were made. I had expected a binary outcome – either tariffs would be announced as expected and a path to negotiating better trade agreements would become apparent (buy the news event), or the contrary, where tariffs were far higher and trade policy much more aggressive than expected. A popular word has been ‘worst case’. I’m not excited to say that this could get much worse, but it certainly can. Is that case avoidable? Absolutely.

Well, here we are in 2025. A new administration, new policies, and a fresh never-ending news cycle for trading algorithms to digest and feast on within seconds of hitting the wires. In the world of more technology and program trading, bouts of volatility can be more frequent in periods of uncertainty.

When I ran for Fort Lauderdale City Commission in 2022, I recall my campaign advisors calling this time of year “silly season”. Silly rumors, silly ads, silly claims, silly rumors, pretty much most of it seemed silly given how serious of a position I was running for. I think the name of this publication “Keeping it Reel” becomes extra appropriate, especially once we get around silly season with just a little more than two months before election day.

In my last publication, I discussed a weakening economy and a resulting higher rate of disinflation – we had made significant progress in cooling off inflation. In this piece, I will continue to highlight this progress, however such progress does come at a cost. The most recent CPI print for June came at a decline of 0.1% from May, putting the 12-month rate at 3%, around the lowest in more than three years. Excluding food and energy costs (often volatile costs), the Core CPI increased 0.1% monthly, which is a 3.3% increase from one year ago. This was the smallest annual increase since April of 2021.

Earlier this year, I published an article titled “Bank Failures, Bond Rallies, Inflation Softening”. In that piece, I covered failures in a handful of banks mostly due to irresponsible management of their bond portfolios and a weak venture capital backdrop (many customers of the bank were VC). The result was essentially a bank run as these customers needed capital, and a panic ensued from lack of such capital that the bank could make available while they sold heavily discounted bonds off their balance sheets to return capital to depositors. Not exactly a recipe for success or risk management.