Following a volatile April for both stocks and bonds, the market seems to be finding a little composure again. Trade war escalation seems to have peaked (for now at least) and investors seem slightly more optimistic that geopolitical tensions will improve before they get worse.
Of course, change has been the norm when it comes to global trade relations, so investors might be wise not to get too comfortable with where conditions have been recently.
That easing is seen in the bond market as well. High yield spreads, which are a measure of how much yield above and beyond the risk-free rate that investors are demanding for taking on risk, has been in steady decline. Lower spreads are generally a sign of greater investor confidence.
Spreads are elevated relative to where they’ve been for most of the past year and a half, which indicates that bond investors are still behaving more cautiously. Given the competing pressures of inflation risk, recession risk and the possibility that the Fed makes several rate cuts later this year, there are a lot of variables at play and a big reason why bonds have seen such fluctuation.
We’re seeing a similar dynamic playing out in the government bond market too.
The 10-year Treasury, often viewed as a safe haven in times of uncertainty, has seen its yield fluctuate within a range of nearly 100 basis points just this year. It has also had to deal with its fair share of volatility catalysts, including selling activity in response to the Trump tariffs that created the opposite reaction one might expect during a pullback in equities.
When both corporate bonds and Treasuries are volatile at the same time, that presents challenges for income investors seeking predictable income. But it also presents a big opportunity in terms of portfolio risk management.
Volatility can actually be a friend of risk rotation strategies. Since investors generally fear volatility, we often see a performance dichotomy between riskier bonds and safer bonds when uncertainty and panic consume the markets. By using a proven signal that pivots a rotation strategy between risk-on and risk-off assets, investors can not only protect themselves from downside risk. They can also potentially diversify away a lot of portfolio risk.
The ATAC Credit Rotation ETF (JOJO) uses the utilities sector as that signal. When utilities outperform the S&P 500, as they have for much of 2025, it indicates that investors might want to tap the brakes on risk-seeking. That signal proved effective this year when it positioned fund shareholders defensively right when the market was correcting in April. That's the type of response from JOJO we hope to see because it provides a better chance for investors to limit downside and reduce risk at the time one’s portfolio needs it the most.
Volatility, while uncomfortable as it’s happening, doesn’t necessarily need to be feared. Risk rotation strategies can take advantage of it. Increasing speed when the weather is clear and slowing down when storms are coming doesn’t need to apply only to driving. Investors can take advantage of that same thought process with their portfolios.
I believe that JOJO is ready to shine again, because the cycle favors more volatility to allow it to.
Sincerely,
Michael A. Gayed, CFA
Junk debt, also known as high-yield bonds or speculative-grade debt, refers to fixed-income securities issued by companies or governments with lower credit ratings, offering higher interest rates to compensate investors for the elevated risk of default.
The VIX index, often called the "fear gauge" of Wall Street, is a real-time market index that measures the market's expectation of 30-day forward-looking volatility derived from S&P 500 index options prices, serving as a key barometer of investor sentiment and market risk.
The ICE BofA BB US High Yield Index Option-Adjusted Spread measures the yield differential between BB-rated corporate bonds and a spot Treasury curve, quantifying the risk premium for below-investment-grade debt with a BB rating in the US market.
As with all ETFs, Fund shares may be bought and sold in the secondary market at market prices. The market price normally should approximate the Fund’s net asset value per share (NAV), but the market price sometimes may be higher or lower than the NAV. The Fund is new with a limited operating history. There are a limited number of financial institutions authorized to buy and sell shares directly with the Fund, and there may be a limited number of other liquidity providers in the marketplace. There is no assurance that Fund shares will trade at any volume, or at all, on any stock exchange. Low trading activity may result in shares trading at a material discount to NAV.
Because the Fund invests in Underlying ETFs an investor will indirectly bear the principal risks of the Underlying ETFs, including but not limited to, risks associated with investments in ETFs, equity securities, growth stocks, large and small capitalization companies, non-diversification, fixed income investments, derivatives and leverage. The prices of fixed income securities may be affected by changes in interest rates, the creditworthiness and financial strength of the issuer and other factors. An increase in prevailing interest rates typically causes the value of existing fixed income securities to fall and often has a greater impact on longer duration and/or higher quality fixed income securities. The Fund will bear its share of the fees and expenses of the underlying funds. Shareholders will pay higher expenses than would be the case if making direct investments in the underlying funds.
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Past performance is no guarantee of future results.
The Fund’s investment objectives, risks, charges, expenses and other information are described in the statutory or summary prospectus, which must be read and considered carefully before investing. You may download the statutory or summary prospectus or obtain a hard copy by calling 855-ATACFUND or visiting www.atacfunds.com. Please read the Prospectuses carefully before you invest.
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