Easy Income Portfolio: April 2025 Update

Welcome to this month's Easy Income Portfolio update — or, as we've been calling it around here, the bouncy portfolio.

Over the last month, prices have done their fair share of hopping around like a rabbit on a trampoline. But while the net asset values have jiggled and jumped, the income has stayed rock solid. We haven't seen even a whisper of volatility in the actual cash coming into the portfolio.

 In fact, thanks to the recent markdowns, new investors can now lock in higher yields than they could just a few weeks ago. If you're sitting on the sidelines, now might be one of the best moments all year to hop in.

Let's talk about what caused all this bouncing. If you've been paying attention, you already know the culprit: Trump's “Liberation Day” surprise.

The administration came out with a tariff regime so aggressive, so far-reaching, that it stunned even the most cynical market watchers. Entire continents got slapped. Allies, adversaries, neutrals — it didn't matter. The initial blast cratered markets in Asia, crushed European stocks, and sent the U.S. indexes into a tailspin.

Bond markets, which normally play the role of the boring grown-up in times like this, panicked just as much. And unlike the old days, Treasuries failed to act as a safe haven. In fact, they dropped hard.

The volatility in the bond and stock markets is being driven by a rare convergence of political, macroeconomic, and technical factors.

First and foremost is policy risk. The sudden imposition of sweeping tariffs has upended global trade expectations and injected deep uncertainty into earnings forecasts for multinational corporations.

Markets hate uncertainty, and what they received from the administration was a heaping serving of it. One moment, a sector is under threat of tariffs; the next, it’s granted a temporary reprieve. Investors have no clear footing on which to base forward estimates, so they sell first and ask questions later.

Second is geopolitical reverberation.

Allies in Europe and Asia have begun to reassess their economic and defense alignments in light of Washington’s erratic trade behavior. This has contributed to capital flight from U.S. assets as global investors reallocate toward domestic infrastructure and defense spending within their own regions.

The result: foreign demand for Treasuries and large-cap U.S. stocks is weakening.

Third is the internal dysfunction within the U.S. government. The party that swept all three branches has shown itself unable to govern coherently. Legislative gridlock over budget resolutions, tax packages, and debt ceiling negotiations has led to fears of policy paralysis at a moment when clarity and leadership are sorely needed. That is hardly the backdrop for confidence in financial markets.

On top of that is the technical blow-up in the basis trade. Hedge funds engaging in heavily leveraged trades between Treasury bonds and futures found themselves on the wrong side of price dislocations. As Treasury bonds dropped faster than futures, margin calls were triggered. In a highly levered trade — often levered 50-to-1 or even 100-to-1 — this kind of misalignment is catastrophic.

The only way out was to liquidate positions, which caused further downward pressure on Treasury prices. That panic cascaded into credit markets and added fuel to the equity volatility.

Now, if you're looking for safety and stability, the Easy Income Portfolio has delivered exactly that. No income has been lost. If anything, the dip in prices has juiced forward yields.

You can now put this portfolio to work with a 9.94% yield, and that's not pie-in-the-sky hypothetical — that's what you'd actually receive if you put cash to work in these assets today.

The reason Treasuries have gone soft. Part of it is a fundamental lack of confidence in the U.S. right now. It's not just adversaries pulling back — it's allies too. Tariffs are being perceived not as economic strategy but as outright aggression, and the back-and-forth around negotiations hasn’t helped.

Add in political dysfunction in Washington — a Congress that can't seem to get out of its own way on budget deals, tax policy, or the debt ceiling — and buyers are simply walking away. And yes, there's been some technical nonsense too, like the infamous basis trade blowing up as overleveraged hedge funds got hit by price distortions between Treasuries and futures. When that trade unwinds, it only adds more fuel to the selling fire.

So what do we do with all this? We go shopping.

First up is InfraCap U.S. Preferred Stock ETF PFFA, run by Jay Hatfield — a guy who knows credit markets like few others. PFFA has dropped 8% over the past month. That's ridiculous. This fund owns high-quality preferreds from utilities, REITs, and banks, and it trades them actively. Unlike index-based preferred ETFs, which sit on their hands, Hatfield's crew looks for price dislocations, buys at a discount, and sells near par. That's how you add alpha in a yield-hunting strategy. The fund's yield is now north of 10%, and that dividend is well covered.

Next up is VanEck BDC Income ETF BIZD. Now, we're picky with BDCs — we only want the ones that have deep relationships with the private equity world. Think Ares Capital, Blue Owl, Golub, FSKKR, Oak Tree. These are firms with access to deal flow, sponsor support, and balance sheets to weather downturns. This ETF only holds 32 positions and is heavily tilted toward the best players in the game. BIZD is down nearly 10% for the month, but the dividend yield is up to 13%. Again, not a typo. Thirteen percent to own some of the most credit-savvy BDCs in the world.

Then there's iShares Mortgage Real Estate ETF REM — the mortgage play. Spreads on agency mortgages have blown out to their widest levels since 2023, brushing against two standard deviations above the norm. That's opportunity. REM is packed with income monsters like AGNC AGNC, Annaly (NLY, Starwood Property Trust STWD, and Ladder Capital (STWD). Barry Sternlicht’s Starwood vehicle in particular is now yielding 11%, and it's diversified with exposure to medical office, hotels, infrastructure finance, and even Europe. The same goes for Ladder, which is arguably the most conservatively capitalized commercial mortgage REIT in the country.

We've also got a supporting cast of private equity-backed commercial mortgage REITs like Blackstone Mortgage Trust, Apollo Commercial Real Estate Finance, and KKR Real Estate Finance Trust. These are the types of names that will not only survive a volatile year — they'll thrive in it. They’re stepping in as lenders of last resort in an environment where most regional banks are on defense.

The result? Despite a 7% drawdown in total return terms over the past month, the Easy Income Portfolio is still ahead of Treasuries, ahead of the S&P 500, and ahead of most income-oriented funds. The income continues to show up in your account — month in, month out — and the best part is you now have the opportunity to buy in even cheaper than you could a month ago.

What's the macro backdrop from here? Mild stagflation is probably the base case. Tariffs don't repatriate manufacturing. They raise prices and slow growth. So we expect a bit of a drag on GDP, a nudge higher on inflation, and likely a few rate cuts before the year is done. As the Fed pivots, bonds will find a floor. When that happens, mark my words — the very same assets you can buy today at fire sale prices will trade 10–15% higher. And you'll still be clipping a 10% yield.

That's this month's update. Keep calm, stay focused, and be a buyer on the big red days. PFFA, BIZD, and REM are the names to add right now. We'll talk again next month, and until then — let volatility be your friend.