June 2025: Run It Hot.
I am content to have not written any big proclamations in April/May 2025 about the Trump presidency, DOGE, Liberation Day (the Tariffs) and now the One Big Beautiful Bill Act headed to the senate in Washington DC. It’s not an easy decision making environment when the Trump news cycle is measured hour to hour and plays out live on X (formerly Twitter).
Let’s base line some key areas of focus (Not Investment Advice):
Core Portfolio: US Equities
Tolerate the volatility. Be patient when allocating new capital. Large cap bias, Value bias. The MAG7 endured a peak to trough 30% draw-down in recent months, Large Cap Value and Large Cap Equal Weight provided a smoother ride. It makes good sense to balance exposure to both Growth and Value in the US Large Cap category.
Bonds: Rate Risk
Short-term treasury bonds still offer 4% yields – enjoy the income. Longer duration bonds (and traditional Intermediate Bond Funds) have been a multi-year disaster. The case for long-term duration right now is NOT strong. If market rates decline (which would be great for bonds), it may be great for equities, too. If market rates increase per the US deficit slow-motion-disaster, bond investors are risking equity-like downside with any significant duration exposure. The best path is to take the 4% yield short-term treasuries offer and keep the bond portion of the portfolio “on sides”.
Satellite Portfolio: Income Alternatives
Utilities, MLPs, Energy. Utilities and MLPs have been great; defensive behavior plus attractive income. WLA’s newest position is a return to the Energy category and an attractive dividend yield just under 4%.
Commodities:
The dollar is weakening, US debt exploding…Gold is one of the best performing assets in the last year. Broad based commodity funds are hard, not all commodities are appreciating. Choose wisely…Western Level added a Gold position across all client accounts earlier in 2025 with room to add more. Uranium remains in the portfolio as well. I believe uranium will benefit long-term from Trump’s recent legislation to accelerate nuclear power projects – the world is under supplied clean, reliable power.
https://www.whitehouse.gov/fact-sheets/2025/05/fact-sheet-president-donald-j-trump-deploys-advanced-nuclear-reactor-technologies-for-national-security/
Summary:
Equities: The aggressive US Equity “everything” rally from the April ‘25 low presumes Tariff’s are a non-issue and we’re not having a recession. However, there are no formal trade agreements in place yet (despite the June 11 announcement that they are) and it is likely there will be some economic softness due to the Tariff disruption. So, expect some volatility this summer – but not as severe as April.
Bonds: The US Government has a significant spending / debt problem, the risk is higher rates.It is possible Trump wants a “Run It Hot" Fed Policy, which is a high growth path, inflation will follow which will deflate the debt and your dollars. The chance to reverse the turbo-level government spending via DOGE is pretty much over.
It's possible the Fed/Trump does a whoopsie and market rates get cooking: If the Fed cuts rates (Run It Hot), the potential blow back is that inflation rips higher and I’m not buying 4% treasuries…so rates go north of 5% and rate sensitive assets get “risky” (bonds, credit, small cap, real estate, financials).
It’s a bit of a multi-player stalemate right now. Bond investors (with intermediate and long duration) lose in most of the economic scenarios. By contrast, US Large Cap equities grind higher in most scenarios and certain commodities will continue to help offset inflation.
Enjoy the start of summer.