Infrastructure Capital’s Substack: Markets & Macro

The Ceasefire Trade Tests the Bond Market's Resolve

Infrastructure Capital — Sat, 25 Apr 2026 14:39:52 GMT

Oil Drops, Yields Hold

The announcement of a two-week ceasefire between the United States and Iran on April 8, 2026, sent energy markets into a sharp reversal. Brent crude fell from approximately $109 per barrel to $95 within hours. West Texas Intermediate crude dropped to a similar level, erasing roughly half of the war premium that had built up since the conflict began in late February.1

The ceasefire allows oil tankers to transit the Strait of Hormuz, which had seen traffic plunge to just six vessels per day in March, down from approximately 130 before the conflict. The United Nations Conference on Trade and Development documented the collapse in shipping activity, which had forced global energy supply chains into costly detours around the Cape of Good Hope.2

The bond market’s response was notably muted. The 10-year Treasury yield held near 4.37 percent despite the oil price decline. Investors appear to recognize that the ceasefire is fragile and that the underlying forces driving yields higher extend well beyond the Middle East conflict. The question is not whether oil prices will decline further, but whether the structural pressures on the bond market have shifted.

Brent crude plunged from $109 to $95 on April 8 after the U.S.-Iran ceasefire announcement, erasing roughly half the war premium. Source: Reuters, ICE

Tariffs, Debt, and the Structural Overhang

The effective U.S. tariff rate stands at 11.8 percent as of April 8, 2026, the highest level since the early 1940s, according to the Yale Budget Lab. Section 122 tariffs, Section 232 metal tariffs, and pharmaceutical tariffs have combined to create a trade policy environment that is raising costs across the supply chain. The Budget Lab estimates that the current tariff structure will cost the average American household between $760 and $940 in higher prices.3

The fiscal backdrop compounds the pressure. The United States must roll over approximately $10 trillion in maturing Treasury debt before the end of the year, on top of a $2 trillion annual deficit. The combination of tariff-driven inflation, massive debt supply, and persistent conflict premium has created what one analyst described as “compound stress” that the bond market is pricing simultaneously.4

Investment-grade option-adjusted spreads remain at 89 basis points, wider than the 78 basis points at year-end. The Bloomberg U.S. Aggregate Bond Index has lost 2.49 percent year-to-date. The “Sell America” trade narrative, which first surfaced during the tariff shocks of April 2025, has returned to investor discussions as foreign demand for Treasuries shows signs of cooling.

The effective U.S. tariff rate has risen to 11.8%, the highest level since the early 1940s. Source: Yale Budget Lab

What the Ceasefire Changes and What It Does Not

The ceasefire, if it holds, removes the most acute supply disruption from the oil market. Analysts at Lipow Oil Associates project that gas prices, currently averaging $4.16 per gallon nationally, could decline by 20 to 40 cents per gallon over the next two weeks. The pre-conflict national average was just below $3 per gallon.5

The ceasefire does not address the structural forces keeping yields elevated. Core PCE inflation remains above 3 percent. The Federal Reserve has signaled no rate cuts for the remainder of 2026. The tariff regime shows no signs of easing. Foreign central banks and sovereign wealth funds have reduced their Treasury holdings in recent months. The term premium demanded by investors to hold long-duration government debt has expanded to levels not seen since the 2022 tightening cycle.6

For fixed income investors, the ceasefire represents a tactical opportunity, not a strategic inflection point. Oil-driven inflation pressures may ease modestly, but the underlying drivers of higher yields remain intact. The bond market’s muted reaction to the ceasefire tells the story clearly: this market is pricing risks that extend well beyond the Persian Gulf.

The U.S. must roll over approximately $10 trillion in maturing Treasury debt in 2026, compounding fiscal pressure on yields. Source: U.S. Treasury Department

Footnotes

1. CNBC, Gas Prices Should Soon Start Easing If Ceasefire Holds, April 8, 2026.

2. United Nations Conference on Trade and Development, Strait of Hormuz Shipping Data, March 2026.

3. Yale Budget Lab, State of U.S. Tariffs: April 8, 2026.

4. Wolf Street, 10-Year US Treasury Yield Flipflops Amid Massive Volatility, April 10, 2026.

5. Lipow Oil Associates via CNBC, April 8, 2026.

6. Federal Reserve, FOMC Statement, March 18, 2026.

About Us

Jay D. Hatfield is CEO of Infrastructure Capital Advisors and is the lead portfolio manager of the Infrastructure Capital Bond Income ETF (NYSE: BNDS), InfraCap Small Cap Income ETF (NYSE: SCAP), InfraCap Equity Income Fund ETF (NYSE: ICAP), InfraCap MLP ETF (NYSE: AMZA), Virtus InfraCap U.S. Preferred Stock ETF (NYSE: PFFA), InfraCap REIT Preferred ETF (NYSE: PFFR) and private funds. Each month Infrastructure Capital hosts a monthly economic webinar; you can sign up to attend by visiting our website www.infracapfunds.com (important disclosures can also be found on the website). For a prospectus please reach out to us or visit the links above for each respective fund.

DISCLOSURE

This information is not an offer to sell, or solicitation of an offer to buy any investment product, security, or services offered by Jay Hatfield, or Infrastructure Capital Advisors, LLC, (”ICA”) or its affiliates. ICA, will only conduct such solicitation of an offer to buy any investment product or service offered by ICA, if at all, by (1) purported definitive documentation (which will include disclosures relating to investment objective, policies, risk factors, fees, tax implications and relevant qualifications), (2) to qualified participants, if applicable, and (3) only in those jurisdictions where permitted by law. Jay Hatfield or ICA may have a beneficial long or short position in securities discussed either through stock ownership, options, or other derivatives; nonetheless, under no circumstances does any article or interview represent a recommendation to buy or sell these securities. This discussion is intended to provide insight into stocks and the market for entertainment and information purposes only and is not a solicitation of any kind. ICA buys and sells securities on behalf of its fund investors and may do so, before and after any particular article herein is published, with respect to the securities discussed in any article posted. ICA’s appraisal of a company (price target) is only one factor that affects its decision whether to buy or sell shares in that company. Other factors might include, but are not limited to, the presence of mandatory limits on individual positions, decisions regarding portfolio exposures, and general market conditions and liquidity needs. As such, there may not always be consistency between the views expressed here and ICA’s trading or holdings on behalf of its fund investors. There may be conflicts between the content posted or discussed and the interests of ICA. Please reach out to the ICA for more information. Investors should make their own decisions regarding any investments mentioned, and the information here is not a substitute for obtaining professional advice from a licensed financial professional. Investing involves risk including the loss of principal invested. Past performance is not a guarantee of future results. The information herein is provided by Infrastructure Capital Advisors, LLC (the “Adviser”), a Registered Investment Adviser and the investment adviser to the InfraCap ETFs. The information is based upon sources believed to be reliable but is not guaranteed as to accuracy.

The information contained herein represents our subjective belief and opinions and should not be construed as investment, tax, legal, or financial advice. Investors should consider the investment objectives, risks, charges, and expenses carefully before investing. Please read the prospectus carefully before investing. For more information about the Fund, Fund strategies or Infrastructure Capital, please reach out to Craig Starr at 212-763-8336 (Craig.Starr@icmllc.com). The Funds are distributed either by Quasar Distributors, LLC or by VP Distributors, LLC, an affiliate of Virtus ETF Advisers, LLC. ICAP, SCAP, and BNDS ETFs are distributed by Quasar Distributors LLC. PFFA, PFFR, and AMZA ETFs are distributed by VP Distributors, LLC an affiliated of Virtus ETF Advisers, LLC.

Value vs. Growth in Small Caps in 2026 — Which Style Factors Are Emerging Winners

Sat, 14 Mar 2026 14:59:50 GMT

After several years of market leadership by speculative growth stocks, early signals suggest the balance may be shifting within small-cap equities. The dominance of unprofitable, narrative-driven companies that characterized much of the post-pandemic cycle appears to be losing momentum. As 2026 begins, investors are increasingly reassessing whether small-cap value stocks, long overlooked, are positioned for a relative revival.¹

Growth’s Long Run and Emerging Cracks

Growth investing maintained an unusually persistent advantage across market capitalizations through mid-2025, with value lagging for an extended stretch. In small caps, that trend was reinforced by enthusiasm for artificial intelligence, expectations of monetary easing, and a willingness to overlook weak fundamentals. Many of the strongest performers were companies with limited revenues or ongoing losses, supported more by liquidity optimism than by earnings durability.

Late 2025 marked a subtle but notable change. Small-cap value indices modestly outperformed their growth counterparts, breaking a multi-year streak of growth leadership. While a single quarter does not establish a lasting regime shift, leadership transitions often begin quietly. The fact that this change emerged first in small caps, rather than among large-cap stocks, is noteworthy given the historical tendency for smaller companies to lead during periods of market broadening.²

The 2025 Speculative Surge and Its Limits

Much of the prior year’s small-cap rally was driven by lower-quality firms. Stocks of unprofitable companies materially outpaced those with positive earnings as investors attempted to anticipate policy shifts. Historically, rallies built on speculative excess rather than improving fundamentals tend to be short-lived.³

As 2025 drew to a close, performance among the most speculative names began to stall. With interest-rate policy likely to normalize gradually, investor attention has increasingly shifted toward balance-sheet strength, cash-flow generation, and valuation discipline. This shift has benefited smaller companies operating in more traditional segments of the economy, including insurance, business services, packaging, and regional banking. These areas had largely been left behind during the prior growth-driven surge.

Why the Backdrop May Favor Value in 2026

Several structural factors suggest a more supportive environment for small-cap value entering 2026. Valuations remain historically compressed, with small-cap stocks trading at unusually deep discounts relative to large-cap peers. At the same time, earnings expectations for smaller companies have begun to improve following a multi-year period of contraction.⁴

Policy dynamics also matter. Fiscal initiatives aimed at domestic investment, infrastructure development, and capital spending tend to favor smaller, economically sensitive firms. Combined with moderating inflation and a more stable interest-rate outlook, these forces could encourage broader market participation rather than continued concentration in a narrow group of growth stocks.

This does not imply that growth investing is no longer relevant. Select small-cap growth companies with sustainable business models and improving profitability may continue to perform well. The distinction heading into 2026 appears less about style labels and more about quality. Companies supported by earnings discipline, balance-sheet resilience, and reasonable valuations appear better positioned than those reliant solely on optimistic narratives.

For investors, the evolving landscape suggests a more balanced opportunity set. After an extended period of growth dominance, small-cap value is no longer facing the same structural headwinds. While market leadership can shift unpredictably, the early signals point toward an environment that may once again reward fundamentals over speculation.

Footnotes

Brian Gilmartin, “Small-Cap Value Shows First Signs of Leadership After Long Growth Run,” Investing.com, January 7, 2026.
Francis Gannon, “4Q25 Small-Cap Recap,” Royce Investment Partners, January 2, 2026.
Adem Tumerkan, “Unprofitable Stocks Surge as Liquidity Expectations Rise,” Dunham Blog, October 24, 2025.
Conestoga Capital Advisors, “Extreme Large-Cap Valuations Signal Opportunity in Small Caps,” December 2, 2025.
Royce Investment Partners, “What’s Next for U.S. Small Caps in 2026,” January 6, 2026.

About Us

DISCLOSURE

This information is not an offer to sell, or solicitation of an offer to buy any investment product, security, or services offered by Jay Hatfield, or Infrastructure Capital Advisors, LLC, (“ICA”) or its affiliates. ICA, will only conduct such solicitation of an offer to buy any investment product or service offered by ICA, if at all, by (1) purported definitive documentation (which will include disclosures relating to investment objective, policies, risk factors, fees, tax implications and relevant qualifications), (2) to qualified participants, if applicable, and (3) only in those jurisdictions where permitted by law. Jay Hatfield or ICA may have a beneficial long or short position in securities discussed either through stock ownership, options, or other derivatives; nonetheless, under no circumstances does any article or interview represent a recommendation to buy or sell these securities. This discussion is intended to provide insight into stocks and the market for entertainment and information purposes only and is not a solicitation of any kind. ICA buys and sells securities on behalf of its fund investors and may do so, before and after any particular article herein is published, with respect to the securities discussed in any article posted. ICA’s appraisal of a company (price target) is only one factor that affects its decision whether to buy or sell shares in that company. Other factors might include, but are not limited to, the presence of mandatory limits on individual positions, decisions regarding portfolio exposures, and general market conditions and liquidity needs. As such, there may not always be consistency between the views expressed here and ICA’s trading or holdings on behalf of its fund investors. There may be conflicts between the content posted or discussed and the interests of ICA. Please reach out to the ICA for more information. Investors should make their own decisions regarding any investments mentioned, and their prospects based on such investors’ own review of publicly available information and should not rely on the information contained herein. ICA nor any of its affiliates accepts any liability whatsoever for any direct or consequential loss howsoever arising, directly or indirectly, from any use of the information contained herein. We have not sought, nor have we received, permission from any third-party to include their information in this article. Certain information contained in this document constitutes “forward-looking statements,” which can be identified by the use of forward-looking terminology such as “may,” “will,” “should,” “expect,” “anticipate,” “project,” “estimate,” “intend,” “continue” or “believe” or the negatives thereof or other variations thereon or other comparable terminology. Due to various risks and uncertainties, actual events or results may differ materially from those reflected or contemplated in such forward-looking statements.

Energy Transfer and Capital Spending Shifts: Implications for MLP Cash Flows

Mon, 26 Jan 2026 18:42:36 GMT

Midstream investors are once again paying close attention to capital budgets. After several years of prioritizing payouts and balance-sheet repair, large pipeline operators are beginning to diverge in how aggressively they reinvest. Some are leaning into new projects, while others are deliberately pulling back. For master limited partnerships, this distinction matters. Capital spending directly influences distributable cash flow, coverage ratios, and ultimately the sustainability of distributions.¹

Across the sector, valuations remain well below historical norms despite relatively stable operating fundamentals.² That disconnect has renewed focus on how individual partnerships balance growth ambitions with cash discipline.

Energy Transfer’s Pipeline Push

Energy Transfer entered 2026 signaling a renewed emphasis on growth. Management announced plans to allocate roughly $5 to $5.5 billion toward expansion projects, with most of the spending directed toward natural-gas infrastructure.³ The strategy reflects expectations for rising demand tied to power generation, data centers, and industrial activity.

To support this shift, the partnership paused development of its proposed Lake Charles LNG export terminal while accelerating investment in pipeline and processing assets that can be placed into service more quickly.⁴ Several of these projects are expected to begin contributing to cash flows during 2026, supporting management’s expectation of improving earnings as volumes ramp.⁵

In the near term, however, higher capital outlays absorb cash that might otherwise support distributions or faster debt reduction. Energy Transfer has emphasized that it intends to fund projects internally, but elevated spending still places pressure on coverage if timelines slip or costs rise.⁶ Investors remain mindful of prior cycles when aggressive capital programs strained cash flows, reinforcing the importance of disciplined execution.

Diverging Paths Across the Midstream Sector

Not all large MLPs are taking the same approach. Enterprise Products Partners is moving toward the end of a multiyear expansion cycle. After several years of elevated spending, management expects capital expenditures to decline meaningfully in 2026, freeing up excess cash that can be allocated to distributions, unit repurchases, or balance-sheet improvements.⁷

Kinder Morgan is pursuing a similarly measured path, with capital plans focused primarily on internally funded expansions rather than large, balance-sheet-intensive projects.⁸

For investors, these diverging strategies highlight an important trade-off. Companies increasing capital spending may offer stronger long-term growth, but often at the expense of near-term cash flexibility. Firms scaling back investment tend to generate steadier free cash flow, which can support distribution stability even if growth moderates.

What It Means for Cash Flows and Valuations

Despite solid fundamentals, many MLPs continue to trade below historical valuation ranges.² Capital allocation decisions help explain why. Elevated spending can delay the realization of cash returns, even when underlying assets perform well. Conversely, restrained budgets can quickly improve coverage metrics and reinforce investor confidence.

Capital spending is not merely an accounting detail. It is the primary lever that determines how much cash ultimately reaches unitholders. Investors evaluating midstream partnerships should weigh not just headline income, but also where each company sits in its investment cycle. The most compelling opportunities often emerge when disciplined capital plans align with durable, contract-backed cash flows.

Footnotes

Reuters, “Energy Transfer expects to spend up to $5.5 billion in 2026 on natgas network,” January 6, 2026.
Geoffrey Seiler, “Energy Transfer vs. Enterprise Products Partners: Which High-Yield Pipeline Stock Will Outperform in 2026?” Nasdaq, December 14, 2025.
Reuters, “Energy Transfer expects to spend up to $5.5 billion in 2026 on natgas network,” January 6, 2026.
Matt DiLallo, “Every Energy Transfer Investor Should Keep an Eye on This Number,” The Motley Fool, June 13, 2025.
“Energy Transfer Expects to Stomp on the Gas in 2026,” Nasdaq, December 18, 2025.
Matt DiLallo, “Every Energy Transfer Investor Should Keep an Eye on This Number,” Nasdaq, June 13, 2025.
Matt DiLallo, “The First Energy Stock I Plan to Buy in 2026,” The Motley Fool, January 4, 2026.
Kinder Morgan, “Kinder Morgan Announces 2026 Financial Expectations,” Business Wire, December 8, 2025.

About Us

DISCLOSURE

This information is not an offer to sell, or solicitation of an offer to buy any investment product, security, or services offered by Jay Hatfield, or Infrastructure Capital Advisors, LLC, (“ICA”) or its affiliates. ICA, will only conduct such solicitation of an offer to buy any investment product or service offered by ICA, if at all, by (1) purported definitive documentation (which will include disclosures relating to investment objective, policies, risk factors, fees, tax implications and relevant qualifications), (2) to qualified participants, if applicable, and (3) only in those jurisdictions where permitted by law. Jay Hatfield or ICA may have a beneficial long or short position in securities discussed either through stock ownership, options, or other derivatives; nonetheless, under no circumstances does any article or interview represent a recommendation to buy or sell these securities. This discussion is intended to provide insight into stocks and the market for entertainment and information purposes only and is not a solicitation of any kind. ICA buys and sells securities on behalf of its fund investors and may do so, before and after any particular article herein is published, with respect to the securities discussed in any article posted. ICA’s appraisal of a company (price target) is only one factor that affects its decision whether to buy or sell shares in that company. Other factors might include, but are not limited to, the presence of mandatory limits on individual positions, decisions regarding portfolio exposures, and general market conditions and liquidity needs. As such, there may not always be consistency between the views expressed here and ICA’s trading or holdings on behalf of its fund investors. There may be conflicts between the content posted or discussed and the interests of ICA. Please reach out to the ICA for more information. Investors should make their own decisions regarding any investments mentioned, and their prospects based on such investors’ own review of publicly available information and should not rely on the information contained herein. ICA nor any of its affiliates accepts any liability whatsoever for any direct or consequential loss howsoever arising, directly or indirectly, from any use of the information contained herein. We have not sought, nor have we received, permission from any third-party to include their information in this article. Certain information contained in this document constitutes “forward-looking statements,” which can be identified by the use of forward-looking terminology such as “may,” “will,” “should,” “expect,” “anticipate,” “project,” “estimate,” “intend,” “continue” or “believe” or the negatives thereof or other variations thereon or other comparable terminology. Due to various risks and uncertainties, actual events or results may differ materially from those reflected or contemplated in such forward-looking statements.

Rate Policy, Credit Conditions, and Small-Cap Fundamentals

Tue, 30 Dec 2025 16:24:44 GMT

When bond yields and equity prices send conflicting messages, experienced investors tend to side with the bond market. Late-2025 pricing in Treasury and Fed funds futures suggests policy may turn more accommodative in early 2026, with markets expecting additional rate cuts beyond what Federal Reserve officials have publicly projected.¹ As those expectations firmed, longer-dated yields eased, reinforcing the signal that financial conditions could gradually loosen.²

Why Rate Expectations Matter for Small Caps

These signals matter disproportionately for smaller companies. Unlike large multinational firms that can tap deep capital markets, small-cap businesses often rely more heavily on bank lending and floating-rate debt.⁴ When policy rates decline, refinancing becomes less expensive, interest burdens fall, and cash-flow flexibility improves. That relief can translate into stronger earnings momentum, particularly for firms that have spent recent years navigating tighter credit conditions. Lower rates also raise the present value of future cash flows, a dynamic that tends to favor smaller, more growth-oriented companies.⁵

History offers useful context. During prior easing cycles, small-cap equities have frequently outperformed their large-cap counterparts as financial conditions improved.⁴⁵ Part of that outperformance reflects valuation dynamics. Today, many small-cap stocks trade at notable discounts relative to large caps, both on earnings and cash-flow measures.⁵ If economic growth remains steady and credit markets continue to thaw, investors searching for underappreciated opportunities may rotate toward these cheaper segments of the market.

Balancing Opportunity With Risk

Lower rates, however, are not a cure-all. Small-cap stocks tend to be less liquid and more volatile than large-cap equities, amplifying drawdowns when growth expectations deteriorate.⁴ These companies also lack the geographic diversification and pricing power that help larger firms absorb economic shocks. If inflation reaccelerates or growth weakens materially, small caps could lag despite a more accommodative policy backdrop.

Even so, the current setup deserves attention. Bond markets are signaling that the peak in policy restraint may be behind us, and past cycles suggest that small-cap equities often respond once easing begins.¹² For investors, the implication is not to abandon discipline, but to recognize that shifting rate expectations can alter relative opportunities across the equity landscape. If fundamentals remain intact, 2026 could mark a period when smaller companies participate more fully in broader market gains.

Footnotes

“What Lower Rates Could Mean for Your Stock Returns,” Popular One, published 2024.
UBS Global Wealth Management, “Treasury Yields and Fed Policy Outlook,” House View Daily, published December 2025.
Howard Schneider, “Divided Fed Lowers Rates, Signals Pause as Growth Rebounds,” Reuters, published December 10, 2025.
Federated Hermes, “Small Caps Could Be Ready to Go Big,” investment commentary, published 2024.
Infrastructure Capital Advisors, “Small Caps and Rate Sensitivity: How Falling Rates Could Reshape Expectations,” research note, published 2025.

About Us

DISCLOSURE

This information is not an offer to sell, or solicitation of an offer to buy any investment product, security, or services offered by Jay Hatfield, or Infrastructure Capital Advisors, LLC, (“ICA”) or its affiliates. ICA, will only conduct such solicitation of an offer to buy any investment product or service offered by ICA, if at all, by (1) purported definitive documentation (which will include disclosures relating to investment objective, policies, risk factors, fees, tax implications and relevant qualifications), (2) to qualified participants, if applicable, and (3) only in those jurisdictions where permitted by law. Jay Hatfield or ICA may have a beneficial long or short position in securities discussed either through stock ownership, options, or other derivatives; nonetheless, under no circumstances does any article or interview represent a recommendation to buy or sell these securities. This discussion is intended to provide insight into stocks and the market for entertainment and information purposes only and is not a solicitation of any kind. ICA buys and sells securities on behalf of its fund investors and may do so, before and after any particular article herein is published, with respect to the securities discussed in any article posted. ICA’s appraisal of a company (price target) is only one factor that affects its decision whether to buy or sell shares in that company. Other factors might include, but are not limited to, the presence of mandatory limits on individual positions, decisions regarding portfolio exposures, and general market conditions and liquidity needs. As such, there may not always be consistency between the views expressed here and ICA’s trading or holdings on behalf of its fund investors. There may be conflicts between the content posted or discussed and the interests of ICA. Please reach out to the ICA for more information. Investors should make their own decisions regarding any investments mentioned, and their prospects based on such investors’ own review of publicly available information and should not rely on the information contained herein. ICA nor any of its affiliates accepts any liability whatsoever for any direct or consequential loss howsoever arising, directly or indirectly, from any use of the information contained herein. We have not sought, nor have we received, permission from any third-party to include their information in this article. Certain information contained in this document constitutes “forward-looking statements,” which can be identified by the use of forward-looking terminology such as “may,” “will,” “should,” “expect,” “anticipate,” “project,” “estimate,” “intend,” “continue” or “believe” or the negatives thereof or other variations thereon or other comparable terminology. Due to various risks and uncertainties, actual events or results may differ materially from those reflected or contemplated in such forward-looking statements.

Earnings Revision Trends Are Quietly Shifting the Small-Cap Narrative

Thu, 25 Dec 2025 22:05:44 GMT

Small-cap stocks have spent most of the past decade living in the shadow of mega-cap leadership. That long stretch of underperformance has conditioned investors to expect disappointment. Recently, however, a change in earnings expectations suggests the outlook for smaller companies may be turning more constructive.

For the first time in roughly 18 months, upward earnings revisions are exceeding downward cuts for companies in the Russell 2000, a widely followed small-cap benchmark.¹ Analysts are no longer steadily lowering the bar. Instead, they are beginning to raise forward profit expectations, particularly for the coming year. Consensus forecasts now imply substantially faster earnings growth for small-cap companies than for their large-cap peers, marking a notable reversal from recent history.²

This shift matters because small-cap earnings estimates have historically been unreliable. Over the past decade, initial projections for Russell 2000 profits were frequently revised sharply lower as the year progressed, far more so than for large-cap indexes.³ That persistent pattern of disappointment weighed heavily on valuations and investor sentiment. The current cycle looks different. Recent reporting seasons have delivered more upside surprises, and management commentary has been less cautious than in prior years. Analysts appear to be responding by adjusting estimates upward rather than retreating.

Valuations Still Reflect Skepticism

Despite improving earnings sentiment, small-cap valuations remain deeply discounted relative to large caps. On an enterprise-value-to-sales basis, the Russell 2000 continues to trade at a substantial discount to the S&P 500, a gap that is wider than its long-term average.⁴ In practical terms, investors are still assigning a much lower value to each dollar of small-cap revenue, even as earnings expectations improve.

This disconnect between fundamentals and pricing helps explain why earnings revisions are drawing renewed attention. Improving profit outlooks tend to matter most when expectations and valuations are already depressed. If earnings growth materializes even modestly, the valuation gap alone creates room for relative performance to improve.

Sector composition also plays a role. Small-cap indexes carry higher exposure to economically sensitive industries such as financials, industrials, and materials. As growth expectations stabilize and financing conditions ease, these areas are seeing more favorable earnings revisions than they have in several years.⁵

Opportunity With Clear Caveats

None of this eliminates the structural risks associated with small-cap investing. A significant share of Russell 2000 constituents remains unprofitable, leaving them vulnerable if growth slows or financing conditions tighten again.⁶ Smaller balance sheets and higher operating leverage can amplify both gains and losses. Earnings momentum must be sustained to justify higher prices.

Still, the combination of rising earnings estimates, discounted valuations, and a less restrictive macro backdrop represents a meaningful change from the environment that has dominated much of the past decade. After emerging from a prolonged earnings downturn, small-cap companies appear to be entering a phase where expectations are no longer working against them.⁷

For investors, the takeaway is not that small caps suddenly lack risk, but that the narrative may finally be shifting. When earnings revisions turn positive from deeply pessimistic levels, the asset class often deserves a second look. Whether this marks a durable leadership change remains uncertain, but the conditions supporting a potential rebound are stronger than they have been in years.

Footnotes

State Street Global Advisors, US Small-Caps: Primed for Potential Upside, Weekly ETF Brief, December 16, 2025.
Joel Leon, “Market Minnows Expected to Lift Earnings Fuels Latest Rally,” Bloomberg, December 3, 2025.
Wellington Management, A Turning Point for U.S. Small Caps, December 2025.
State Street Global Advisors, US Small-Caps: Primed for Potential Upside, December 16, 2025.
RBC Capital Markets, U.S. Equity Market Outlook: 2026, December 15, 2025.
Northwestern Mutual, “Small Caps Outperform on Expected Rate Cuts,” October 27, 2025.
J.P. Morgan Asset Management, “Will Small-Cap Earnings Lead the Pack?” On the Minds of Investors, 2025.

About Us

DISCLOSURE

This information is not an offer to sell, or solicitation of an offer to buy any investment product, security, or services offered by Jay Hatfield, or Infrastructure Capital Advisors, LLC, (“ICA”) or its affiliates. ICA, will only conduct such solicitation of an offer to buy any investment product or service offered by ICA, if at all, by (1) purported definitive documentation (which will include disclosures relating to investment objective, policies, risk factors, fees, tax implications and relevant qualifications), (2) to qualified participants, if applicable, and (3) only in those jurisdictions where permitted by law. Jay Hatfield or ICA may have a beneficial long or short position in securities discussed either through stock ownership, options, or other derivatives; nonetheless, under no circumstances does any article or interview represent a recommendation to buy or sell these securities. This discussion is intended to provide insight into stocks and the market for entertainment and information purposes only and is not a solicitation of any kind. ICA buys and sells securities on behalf of its fund investors and may do so, before and after any particular article herein is published, with respect to the securities discussed in any article posted. ICA’s appraisal of a company (price target) is only one factor that affects its decision whether to buy or sell shares in that company. Other factors might include, but are not limited to, the presence of mandatory limits on individual positions, decisions regarding portfolio exposures, and general market conditions and liquidity needs. As such, there may not always be consistency between the views expressed here and ICA’s trading or holdings on behalf of its fund investors. There may be conflicts between the content posted or discussed and the interests of ICA. Please reach out to the ICA for more information. Investors should make their own decisions regarding any investments mentioned, and their prospects based on such investors’ own review of publicly available information and should not rely on the information contained herein. ICA nor any of its affiliates accepts any liability whatsoever for any direct or consequential loss howsoever arising, directly or indirectly, from any use of the information contained herein. We have not sought, nor have we received, permission from any third-party to include their information in this article. Certain information contained in this document constitutes “forward-looking statements,” which can be identified by the use of forward-looking terminology such as “may,” “will,” “should,” “expect,” “anticipate,” “project,” “estimate,” “intend,” “continue” or “believe” or the negatives thereof or other variations thereon or other comparable terminology. Due to various risks and uncertainties, actual events or results may differ materially from those reflected or contemplated in such forward-looking statements.

Beyond Mega-Cap Mania: Rebalancing Toward Small-Mid Caps for Diversified Equity Exposure

Thu, 04 Dec 2025 16:52:12 GMT

The stock market of the past few years has revolved around a familiar theme: a handful of mega-cap giants driving most of the index-level performance. Their influence has become so large that broad-market exposure is not as balanced as it appears. Concentration has always played a role in market cycles, yet the current level is striking. When so much of an index’s behavior depends on a few companies, many clustered in the same industry, investors should ask whether their portfolios still reflect genuine diversification.

Market history offers perspective. Periods like the late 1960s and the dot-com boom saw similar waves of investor enthusiasm for dominant companies. Leadership looked unshakable in the moment, yet many of the top firms ultimately lagged once conditions shifted. Even in 2000, when the ten largest companies made up a far smaller share of the S&P 500 than today, only one of those leaders went on to outperform the broader market in the decades that followed.¹ Concentration can mask fragility, especially when investor expectations inflate faster than underlying fundamentals.

Why Small and Mid Caps Matter Again

That context makes the case for revisiting small and mid-cap exposure. After years of lagging, smaller companies now trade at some of the most attractive relative valuations seen in decades. Research shows that small caps recently priced at a steep discount to large caps, a level that historically has preceded stronger relative returns.² Markets routinely overreact to near-term headwinds, and the gap between perception and reality can widen to a point where opportunities emerge for long-term investors.

Small and mid-cap stocks also provide characteristics that complement rather than mimic the mega-cap profile. Over extended periods, smaller companies have delivered higher average returns, thanks in part to their capacity for faster growth from a smaller base.³ Their performance tends to be more cyclical, which has worked against them during periods of economic uncertainty or tight financial conditions. Yet this same sensitivity can become an advantage when recoveries begin, as smaller firms often rebound with greater force once conditions brighten.²

Interest-rate dynamics matter as well. Many small-cap firms rely more heavily on costlier financing, making them more vulnerable during tightening cycles. As policy eventually eases and borrowing costs decline, these pressures can reverse quickly. Analysts note that falling rates often improve both credit access and profitability for smaller companies, creating a tailwind that large caps may not experience to the same degree.²

The Case for Rebalancing

None of this diminishes the value of owning established leaders. Mega-caps remain essential components of many portfolios. The argument is simply that balance matters. Small and mid-cap stocks tap into parts of the economy underrepresented in an index dominated by large technology firms: industrials, regional financials, energy infrastructure, and domestic consumer businesses. Their different drivers can help smooth portfolio behavior as leadership rotates.

If the market broadens, investors positioned only in the giants may miss the next leg of opportunity. Reintroducing smaller companies into the mix is not a contrarian bet; it is a recognition that no cycle persists indefinitely. Diversification ensures exposure to what is working today and what may lead tomorrow.

Footnotes

Justin McNichols, “The S&P 500 Concentration,” Osborne Partners, January 16, 2025.
Daniel Fang, “Concerned About Market Concentration and Lofty Valuations? Consider Small Caps,” CFA Institute Enterprising Investor, June 19, 2024.
Dáire Dunne and Irmak Surenkok, “A Turning Point for US Small Caps,” Wellington Management, 2023.

About Us

DISCLOSURE

This information is not an offer to sell, or solicitation of an offer to buy any investment product, security, or services offered by Jay Hatfield, or Infrastructure Capital Advisors, LLC, (“ICA”) or its affiliates. ICA, will only conduct such solicitation of an offer to buy any investment product or service offered by ICA, if at all, by (1) purported definitive documentation (which will include disclosures relating to investment objective, policies, risk factors, fees, tax implications and relevant qualifications), (2) to qualified participants, if applicable, and (3) only in those jurisdictions where permitted by law. Jay Hatfield or ICA may have a beneficial long or short position in securities discussed either through stock ownership, options, or other derivatives; nonetheless, under no circumstances does any article or interview represent a recommendation to buy or sell these securities. This discussion is intended to provide insight into stocks and the market for entertainment and information purposes only and is not a solicitation of any kind. ICA buys and sells securities on behalf of its fund investors and may do so, before and after any particular article herein is published, with respect to the securities discussed in any article posted. ICA’s appraisal of a company (price target) is only one factor that affects its decision whether to buy or sell shares in that company. Other factors might include, but are not limited to, the presence of mandatory limits on individual positions, decisions regarding portfolio exposures, and general market conditions and liquidity needs. As such, there may not always be consistency between the views expressed here and ICA’s trading or holdings on behalf of its fund investors. There may be conflicts between the content posted or discussed and the interests of ICA. Please reach out to the ICA for more information. Investors should make their own decisions regarding any investments mentioned, and their prospects based on such investors’ own review of publicly available information and should not rely on the information contained herein. ICA nor any of its affiliates accepts any liability whatsoever for any direct or consequential loss howsoever arising, directly or indirectly, from any use of the information contained herein. We have not sought, nor have we received, permission from any third-party to include their information in this article. Certain information contained in this document constitutes “forward-looking statements,” which can be identified by the use of forward-looking terminology such as “may,” “will,” “should,” “expect,” “anticipate,” “project,” “estimate,” “intend,” “continue” or “believe” or the negatives thereof or other variations thereon or other comparable terminology. Due to various risks and uncertainties, actual events or results may differ materially from those reflected or contemplated in such forward-looking statements.

Active Fixed-Income Strategies: Why Security Selection Matters More Than Ever

Wed, 03 Dec 2025 15:59:38 GMT

Bond investors finally have income again, yet the environment heading into 2026 is anything but straightforward. Yields look attractive compared with the last decade, although one leading fixed-income manager recently warned that this is not a “set-it-and-forget-it” market. With valuations tight, idiosyncratic risks resurfacing, and technical forces steering prices, the case for careful security selection has rarely been stronger.

Tight Valuations, Thin Buffers

Credit spreads across investment-grade and high-yield markets sit near their most compressed levels in decades.¹² That leaves investors with little protection should sentiment shift. Spreads have far more room to widen than tighten from here, which means most of the return now comes from carry rather than price appreciation. Demand for yield after years of ultralow rates has pulled investors into credit, pushing spreads to levels that barely compensate for taking on additional risk. A broad index today may hold plenty of fully valued bonds with little margin for error.

In this backdrop, selectivity becomes essential. When everything is priced for perfection, the right individual credit matters more than the index average. Several asset managers have argued that success now depends less on owning “the market” and more on identifying issuers still offering reasonable value.

Idiosyncratic Risk Is Back

Complacency can take hold when defaults remain muted, although recent cracks show why security selection matters. A few 2025 bankruptcies—including a subprime lender and a major auto-parts supplier—served as reminders that company-specific failures still occur.³ Default rates in speculative-grade credit have drifted back toward historical norms after the stimulus-supported calm of 2021–2022.⁴⁵ None of this signals a systemic crisis.⁶ It does, however, highlight the risk of owning weaker issuers that offer little spread compensation for the possibility of real credit deterioration.

In broad index products, investors can unintentionally hold issuers whose fundamentals have already begun to erode. Dispersion within ratings buckets has widened, with weaker BBB and BB names trading materially apart from stronger peers.⁷⁸ For active managers, that dispersion is opportunity. For passive investors, it is unintended risk.

Technical Currents Shaping 2026

Strong demand has supported bonds through 2025, keeping spreads tight even as macro uncertainty lingered. New issuance has been met with heavy subscription, often with minimal concessions. On the supply side, companies have hesitated to lock in long-term borrowing costs at current levels, constraining available paper just as buyers re-engage with fixed income.

These technical supports may not persist. A shift in corporate refinancing needs, government borrowing patterns, or market liquidity could weaken the backdrop. When technicals dominate market direction, passive investors drift with the current, while active managers at least have the ability to steer around excess supply or temporary dislocations.

Why Selection Matters in 2026

Income opportunities have improved, although the easy part of the bond rally is likely behind us. With spreads tight, defaults normalizing, and technicals in flux, security selection becomes the true differentiator. Favoring stronger balance sheets, diversifying exposures, and avoiding issuers with deteriorating fundamentals can make the difference between earning steady income and absorbing permanent losses.

The bond market is no longer a place to buy everything and hope the tide lifts all boats. In 2026, what you own matters more than how much you own. The investors who do the credit work—and sidestep the landmines—stand the best chance of preserving income while managing risk.

Footnotes

Janus Henderson Investors. High-Yield Bonds: Can Tight Credit Spreads Persist? Accessed 2025.
Bloomberg and ICE BofA Indices data cited in Janus Henderson Investors, High-Yield Bonds: Can Tight Credit Spreads Persist? Accessed 2025.
Charles Schwab. High-Yield Defaults: Canary in the Coal Mine? October 24, 2025.
Charles Schwab. High-Yield Defaults: Canary in the Coal Mine? October 24, 2025 — discussion of U.S. speculative-grade default trends.
Charles Schwab. High-Yield Defaults: Canary in the Coal Mine? October 24, 2025 — commentary on normalization of defaults.
ICG (Intermediate Capital Group). Recent US Credit Market Dislocation: Systemic or Idiosyncratic? October 24, 2025.
RPIA. Credit Market Themes in 5 Charts (Q3 2025). October 9, 2025.
RPIA. Credit Market Themes in 5 Charts (Q3 2025). October 9, 2025 — analysis of spread dispersion across rating tiers.

About Us

DISCLOSURE

This information is not an offer to sell, or solicitation of an offer to buy any investment product, security, or services offered by Jay Hatfield, or Infrastructure Capital Advisors, LLC, (“ICA”) or its affiliates. ICA, will only conduct such solicitation of an offer to buy any investment product or service offered by ICA, if at all, by (1) purported definitive documentation (which will include disclosures relating to investment objective, policies, risk factors, fees, tax implications and relevant qualifications), (2) to qualified participants, if applicable, and (3) only in those jurisdictions where permitted by law. Jay Hatfield or ICA may have a beneficial long or short position in securities discussed either through stock ownership, options, or other derivatives; nonetheless, under no circumstances does any article or interview represent a recommendation to buy or sell these securities. This discussion is intended to provide insight into stocks and the market for entertainment and information purposes only and is not a solicitation of any kind. ICA buys and sells securities on behalf of its fund investors and may do so, before and after any particular article herein is published, with respect to the securities discussed in any article posted. ICA’s appraisal of a company (price target) is only one factor that affects its decision whether to buy or sell shares in that company. Other factors might include, but are not limited to, the presence of mandatory limits on individual positions, decisions regarding portfolio exposures, and general market conditions and liquidity needs. As such, there may not always be consistency between the views expressed here and ICA’s trading or holdings on behalf of its fund investors. There may be conflicts between the content posted or discussed and the interests of ICA. Please reach out to the ICA for more information. Investors should make their own decisions regarding any investments mentioned, and their prospects based on such investors’ own review of publicly available information and should not rely on the information contained herein. ICA nor any of its affiliates accepts any liability whatsoever for any direct or consequential loss howsoever arising, directly or indirectly, from any use of the information contained herein. We have not sought, nor have we received, permission from any third-party to include their information in this article. Certain information contained in this document constitutes “forward-looking statements,” which can be identified by the use of forward-looking terminology such as “may,” “will,” “should,” “expect,” “anticipate,” “project,” “estimate,” “intend,” “continue” or “believe” or the negatives thereof or other variations thereon or other comparable terminology. Due to various risks and uncertainties, actual events or results may differ materially from those reflected or contemplated in such forward-looking statements.

The Small-Cap Income Opportunity: Why Infrastructure Capital Small Cap Income ETF (SCAP) Might Be a Barometer for Risk Appetite

Thu, 20 Nov 2025 17:48:36 GMT

Market activity in recent months has underscored a renewed appetite for risk. U.S. small-cap equities surged following signals that the Federal Reserve would reverse its tightening cycle, leading broader market gains¹. Measures of institutional sentiment, such as the State Street Risk Appetite Index[1] have remained positive for four consecutive months². Capital rotation from defensive sectors like utilities toward cyclical and higher-beta[2] industries suggests investors are positioning for continued growth³. Simply put, the market’s behavior may reflect willingness to embrace volatility in pursuit of higher returns.

Within that backdrop, The InfraCap Small Cap Income ETF (SCAP) offers a distinct lens into market psychology. Structured for investors seeking both income and growth, SCAP pursues a strategy that blends dividend yield potential with small-cap exposure⁴. Unlike traditional income funds that rely on large-cap, stable dividend payers, SCAP intentionally ventures into smaller, often overlooked companies. The approach amplifies potential reward but also risk.

This risk-forward positioning allows SCAP to function as an informal barometer of investor confidence. Small- and mid-cap companies tend to outperform when optimism is high and liquidity is abundant, yet they lag when macro uncertainty rises. Because SCAP focuses on income within this volatile segment, its relative performance can reveal shifts in collective sentiment. A rally in SCAP may indicate broad confidence that growth will persist and financing conditions will remain supportive. Conversely, weakness could reflect a defensive turn—an early sign that markets are bracing for slower growth or renewed volatility.

As of 9/30/2025 (SCAP ETF Fact Sheet)

Of course, risk and reward are inseparable. Chasing income in small-cap equities can be rewarding when the economy expands, but it also magnifies drawdowns when conditions tighten. SCAP’s allocations may experience heightened swing. For that reason, the fund is better viewed as a specialized satellite holding rather than a low-risk income anchor. Investors who monitor SCAP’s trajectory may gain valuable insight into how far markets are willing to lean into risk.

Ultimately, SCAP’s significance extends beyond its portfolio construction. It embodies the ongoing tension between yield and prudence—a test case for how investors balance short-term income opportunities with long-term capital growth. SCAP’s performance can serve as a real-time reflection of that evolving balance between optimism and caution.

Footnotes

Clearstead, August Review 2025.
State Street, Institutional Investor Indicators: August 2025.
Clearstead, August Review 2025.
Infrastructure Capital Advisors, InfraCap Small Cap Income ETF (SCAP).
Ibid.

About Us

a monthly economic webinar; you can sign up to attend by visiting our website www.infracapfunds.com (important disclosures can also be found on the website). For a prospectus please reach out to us or visit the links above for each respective fund.

DISCLOSURE

Investors should make their own decisions regarding any investments mentioned, and their prospects based on such investors’ own review of publicly available information and should not rely on the information contained herein.

ICA nor any of its affiliates accepts any liability whatsoever for any direct or consequential loss howsoever arising, directly or indirectly, from any use of the information contained herein. We have not sought, nor have we received, permission from any third-party to include their information in this article.

Certain information contained in this document constitutes “forward-looking statements,” which can be identified by the use of forward-looking terminology such as “may,” “will,” “should,” “expect,” “anticipate,” “project,” “estimate,” “intend,” “continue” or “believe” or the negatives thereof or other variations thereon or other comparable terminology. Due to various risks and uncertainties, actual events or results may differ materially from those reflected or contemplated in such forward-looking statements.

The information contained herein represents our subjective belief and opinions and should not be construed as investment, tax, legal, or financial advice. Investors should consider the investment objectives, risks, charges, and expenses carefully before investing. Please read the prospectus carefully before investing. For more information about the Fund, Fund strategies or Infrastructure Capital, please reach out to Craig Starr at 212- 763-8336 (Craig.Starr@icmllc.com). The Funds are distributed either by Quasar Distributors, LLC or by VP Distributors, LLC, an affiliate of Virtus ETF Advisers, LLC. ICAP, SCAP, and BNDS ETFs are distributed by Quasar Distributors LLC. PFFA, PFFR, and AMZA ETFs are distributed by VP Distributors, LLC an affiliated of Virtus ETF Advisers, LLC.

Fund Risks

This material must be preceded or accompanied by a prospectus. Investors should consider the investment objectives, risks, charges, and expenses carefully before investing. Please read the prospectus carefully before investing. For more information about the Fund, Fund strategies or Infrastructure Capital, please reach out to Craig Starr at 212-763-8336 (Craig.Starr@icmllc.com).

A word about SCAP risk: Investing involves risk, including possible loss of principal. An investment in the Fund may be subject to risks which include, among others, investing in equities securities, dividend paying securities, utilities, small-, mid- and large-capitalization companies, real estate investment trusts, master limited partnerships, foreign investments and emerging, debt securities, depositary receipts, market events, operational, high portfolio turnover, trading issues, active management, fund shares trading, premium/discount risk and liquidity of fund shares, which may make these investments volatile in price. Foreign investments are subject to risks, which include changes in economic and political conditions, foreign currency fluctuations, changes in foreign regulations, and changes in currency exchange rates which may negatively impact the Fund’s returns. Small and Medium- capitalization companies, foreign investments and high yielding equity and debt securities may be subject to elevated risks. The Fund is a recently organized investment company with no operating history. Please see prospectus for discussion of risks. Diversification cannot assure a profit or protect against loss in a down market. SCAP is distributed by Quasar Distributors, LLC.

A word about ICAP Risk: Investing involves risk, including possible loss of principal. An investment in the Fund may be subject to risks which include, among others, investing in equities securities, dividend paying securities, utilities, preferred stocks, leverage, short sales, small-, mid- and large- capitalization companies, real estate investment trusts, master limited partnerships, foreign investments and emerging, debt securities, depositary receipts, market events, operational, high portfolio turnover, trading issues, options, active management, fund shares trading, premium/discount risk and liquidity of fund shares, which may make these investments volatile in price. Foreign investments are subject to risks, which include changes in economic and political conditions, foreign currency fluctuations, changes in foreign regulations, and changes in currency exchange rates which may negatively impact the Fund’s returns. Small and Medium-capitalization companies, foreign investments, options, leverage, short sales, and high yielding equity and debt securities may be subject to elevated risks. The Fund is a recently organized investment company with no operating history. Please see prospectus for discussion of risks. ICAP fund distributor, Quasar Distributors, LLC.

A word about BNDS risk: Investing involves risk, including possible loss of principal. An investment in the Fund may be subject to risks which include, among others, investing in fixed income securities, dividend paying securities, utilities, small-, mid- and large-capitalization companies, real estate investment trusts, master limited partnerships, debt securities, market events, operational, high portfolio turnover, trading issues, active management, fund shares trading, premium/discount risk and liquidity of fund shares, which may make these investments volatile in price. Small and Medium-capitalization companies, and high yielding equity and debt securities may be subject to elevated risks. New Fund Risk. The Fund is a recently organized investment company with no operating history prior to the date of this Prospectus. As a result, prospective investors have no track record or history on which to base their investment decision. Debt Securities Risk. Increases in interest rates typically lower the value of debt securities held by the Fund. Investments in debt securities include credit risk. Credit Risk. An issuer of debt securities may not make timely payments of principal and interest and may default entirely in its obligations. A decrease in the issuer’s credit rating may lower the value of debt securities.

Interest Rate Risk. Securities could lose value because of interest rate changes. For example, bonds tend to decrease in value if interest rates rise. Derivatives Risk. Derivatives may pose risks in addition to and greater than those associated with investing directly in securities, currencies or other investments, including risks relating to leverage, imperfect correlations with underlying investments or the Fund’s other portfolio holdings, high price volatility, lack of availability, counterparty credit, liquidity, valuation and legal restrictions.

Options Risk. Options transactions involve special risks that may make it difficult or impossible to close a position when the Fund desires. A fund that purchases options, which are a type of derivative, is subject to the risk that gains, if any, realized on the position, will be less than the amount paid as premiums to the writer of the option. BNDS fund distributor, Quasar Distributors, LLC.

The Funds are distributed either by Quasar Distributors, LLC or by VP Distributors, LLC, an affiliate of Virtus ETF Advisers, LLC. ICAP, SCAP, and BNDS ETFs are distributed by Quasar Distributors LLC. PFFA, PFFR, and AMZA ETFs are distributed by VP Distributors, LLC an affiliated of Virtus ETF Advisers, LLC.

[1] The State Street Risk Appetite Index is a monthly indicator that measures the risk appetite of institutional investors by analyzing their buying and selling patterns across a range of asset classes. A positive index value suggests investors are generally adding risk to their portfolios, while a negative value indicates they are reducing risk by selling riskier assets and moving toward more defensive ones, like bonds and cash

[2] A high beta is a financial term for an investment (like a stock) with a beta value greater than 1.0, indicating that it is more volatile than the overall market. This means a high-beta stock’s price is expected to move more dramatically than the market, offering the potential for higher returns but also carrying a greater risk of larger losses. For context, the overall market (e.g., the S&P 500) is considered to have a beta of 1.0.

Oil’s Slide, Treasury Yields & the Hidden Link

Fri, 07 Nov 2025 18:29:36 GMT

A precipitous fall in oil prices has sent a silent ripple through financial markets. Now with crude collapsing to multi-year lows, inflation pressures recede — dragging long-term interest rates down and along with them borrowing costs. This slide could eventually send the benchmark 10-year Treasury yield below 4%, which would bring welcome relief to consumers as well as businesses.

From Oil Glut to Inflation Calm

Crude oil has dropped to its lowest point in more than a year, with West Texas Intermediate falling below $57 per barrel amid soft demand and surging supply. Moderate world growth, strong US shale and an OPEC+ renewed push for market share are the main contributors to an excess¹. Less expensive oil filters through the economy in lower fuel, transportation and production costs—helping to suppress consumer inflation and boost purchasing power².

That deflationary effect has given investors reason to second-guess interest rate expectations. Treasury yields have fallen alongside crude, as markets act on a “Goldilocks” scenario — not a recession³ but cooling inflation.

The Missing Link: Oil and the 10-Year Yield

Oil’s role in inflation connects it closely to bond yields. When oil prices fall, so do expectations for inflation and investors demand less compensation for the risk that prices will increase over time. The yield on the 10-year Treasury—widely seen as the market’s inflation gauge—tends accordingly to decline⁴.

Crude and the 10-year yield tend to move together because both pivot off inflation trends. Now, as oil is in free fall, yields could drop meaningfully. The relationship is imperfect, but recent data make a case for it: Every major pullback in oil this fall has been greeted with a rally in Treasuries.

From Crude to Credit

Crashing Treasury yields send ripples across credit markets. The 10-year is a benchmark for mortgages, auto loans and corporate debt, so a decline generally leads to lower rates for borrowers⁶. Even a small move below 4% could help unlock some of the market that had frozen up when mortgage rates jumped⁷.

Corporations benefit as well. Less borrowing costs mean less fear of liquidity freeze. This, along with the “tax-cut effect” on purchasing power from cheaper energy has provided a temporary boost to corporate balance sheets and consumer spending².

Investor Implications

Lower yields offer both opportunity and danger for investors. Income-oriented assets — utilities, preferreds, and high-yield bonds in particular — generally do well when rates are falling. While Treasury rates should find themselves below 4% given slower growth prospects, there is value in higher-yielding securities if default risk stays low⁸.

But that same oil slump, which cools inflation, also points to weak demand. If global activity continues to struggle, corporate earnings could weaken even as financing costs fall. Investors looking to capitalize on struggling yields should temper that optimism with a decent amount of diversification.

What oil’s collapse shows, though, is that this is bigger than a commodity story — it’s an indication of just how interconnected all these markets are. The price of crude is quietly reshaping the cost of money itself, from gas pumps to bond desks.

Footnotes

¹ “Oil Prices Are Falling. That Could Mean Lower Borrowing Costs,” Business Insider, October 2025, https://www.businessinsider.com/oil-prices-interest-rates-10-year-treasury-wti-brent-crude-2025-10.
² “US 10-Year Yields May Hit 3.75% on Oil Slide,” InvestmentNews, October 2025, https://www.investmentnews.com/fixed-income/us-10-year-yields-may-hit-375-on-oil-slide-yardeni-says/262645.
³ Ibid.
⁴ “Oil Price Decline Could Lower US Treasury Yields,” GuruFocus, October 2025, https://www.gurufocus.com/news/3151375/oil-price-decline-could-lower-us-treasury-yields-says-analyst.
⁵ InvestmentNews, October 2025.
⁶ “How Does the 10-Year Treasury Yield Affect Mortgage Rates?” Kiplinger, October 2025, https://www.kiplinger.com/real-estate/buying-a-home/how-does-the-10-year-treasury-yield-affect-mortgage-rates.
⁷ Business Insider, October 2025.
⁸ Infrastructure Capital Advisors, “Weekly Commentary,” October 2025, https://www.infracapfunds.com/post/sept-weekly-commentary.

About Us

DISCLOSURE

This information is not an offer to sell, or solicitation of an offer to buy any investment product, security, or services offered by Jay Hatfield, or Infrastructure Capital Advisors, LLC, (“ICA”) or its affiliates. ICA, will only conduct such solicitation of an offer to buy any investment product or service offered by ICA, if at all, by (1) purported definitive documentation (which will include disclosures relating to investment objective, policies, risk factors, fees, tax implications and relevant qualifications), (2) to qualified participants, if applicable, and (3) only in those jurisdictions where permitted by law. Jay Hatfield or ICA may have a beneficial long or short position in securities discussed either through stock ownership, options, or other derivatives; nonetheless, under no circumstances does any article or interview represent a recommendation to buy or sell these securities. This discussion is intended to provide insight into stocks and the market for entertainment and information purposes only and is not a solicitation of any kind. ICA buys and sells securities on behalf of its fund investors and may do so, before and after any particular article herein is published, with respect to the securities discussed in any article posted. ICA’s appraisal of a company (price target) is only one factor that affects its decision whether to buy or sell shares in that company. Other factors might include, but are not limited to, the presence of mandatory limits on individual positions, decisions regarding portfolio exposures, and general market conditions and liquidity needs. As such, there may not always be consistency between the views expressed here and ICA’s trading or holdings on behalf of its fund investors. There may be conflicts between the content posted or discussed and the interests of ICA. Please reach out to the ICA for more information. Investors should make their own decisions regarding any investments mentioned, and their prospects based on such investors’ own review of publicly available information and should not rely on the information contained herein. ICA nor any of its affiliates accepts any liability whatsoever for any direct or consequential loss howsoever arising, directly or indirectly, from any use of the information contained herein. We have not sought, nor have we received, permission from any third-party to include their information in this article. Certain information contained in this document constitutes “forward-looking statements,” which can be identified by the use of forward-looking terminology such as “may,” “will,” “should,” “expect,” “anticipate,” “project,” “estimate,” “intend,” “continue” or “believe” or the negatives thereof or other variations thereon or other comparable terminology. Due to various risks and uncertainties, actual events or results may differ materially from those reflected or contemplated in such forward-looking statements.

7000 or Bust: Why Equity Valuations Can Stay Elevated

Thu, 06 Nov 2025 15:32:13 GMT

The S&P 500’s climb toward 7,000 looks less like fantasy and more like math. At a forward price-to-earnings ratio near 23×, if corporate profits reach roughly $300 a share, the index would trade near that level¹. This multiple may appear stretched, yet today’s earnings power and policy backdrop make it more defensible than during past peaks.

Technology now accounts for about 30 percent of total S&P earnings, up from 10 percent two decades ago³. That shift explains much of the index’s higher valuation: tech profits grow faster than the rest of the economy and remain capital-light. Combine that with moderating interest rates, and equities look attractive relative to bonds².

Consensus forecasts call for S&P earnings to rise roughly 10–11 percent in 2025 and another 14 percent in 2026⁴. On that trajectory, profits would reach about $305 per share—enough to justify an index near 7,000 at 23× earnings. Even modest growth supports today’s pricing since each one-percent gain in earnings implies a 23-point move in valuation⁴⁵. FactSet data show a forward earnings yield near 4 percent, not far above long-term Treasury rates⁶, suggesting investors still expect earnings to deliver.

Policy Tailwinds

Corporate tax policy could strengthen that case. Lawmakers have revived proposals to lower the statutory U.S. rate for domestic manufacturers to 15 percent⁹. Morgan Stanley argues such cuts would lift after-tax profits across technology, industrial, and energy sectors⁹. J.P. Morgan estimates roughly 18 percent of listed companies—representing nearly a quarter of total earnings—would benefit directly¹⁰¹¹¹². Even a partial reduction could raise aggregate earnings a few percentage points, effectively expanding the market’s justified multiple.

The AI Dividend

Another pillar is technology’s newest growth engine. Artificial intelligence continues to drive investment and optimism. Bloomberg recently noted that “big tech is still pouring billions into AI infrastructure, cheering investors and bolstering the case for betting on the technology”¹³. Remove the so-called “Magnificent Seven,” and the market’s valuation reverts to historical norms¹⁴. Add them back in, and the aggregate multiple jumps. In essence, today’s 23× valuation is a wager that AI innovation translates into sustained revenue and margin expansion¹⁵.

A Measured Outlook

High valuations always warrant caution. Interest-rate cuts, potential tax reform, and productivity gains from AI all need to materialize for 7,000 to hold. Any disappointment could shave a few turns off the P/E ratio. Still, expensive markets can remain expensive longer than skeptics expect. As State Street strategist Michael Arone reminds clients, “expensive investments can, and often do, get more expensive”¹⁶.

The “7000 or bust” narrative captures both sides of this equation. If profits grow as projected and fiscal policy turns supportive, valuations may remain elevated without signaling a bubble. Should those assumptions fail, correction risk rises. Either way, investors must focus on earnings durability, not just index milestones.

Footnotes

FactSet, S&P 500 Earnings Season Update (Oct 31 2025).
Investing.com, S&P 500 Earnings Outlook: 2026 EPS Growth Projection Still Around 14 % (2025).
State Street Global Advisors, Why High Valuations May Not Matter and Where to Look for Opportunities in 2025.
4–5. Investing.com; State Street Global Advisors.
FactSet, Earnings Season Update (2025).
Morgan Stanley, S&P 500 All-Time High 2025: What’s Next?
10–12. J.P. Morgan Asset Management, The Beneficiaries of a U.S. Corporate Tax Cut.
Bloomberg, Big Tech Earnings Reveal Cracks in Case for Massive AI Spending (Nov 2025).
14–16. State Street Global Advisors, Why High Valuations May Not Matter and Where to Look for Opportunities in 2025.

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DISCLOSURE

This information is not an offer to sell, or solicitation of an offer to buy any investment product, security, or services offered by Jay Hatfield, or Infrastructure Capital Advisors, LLC, (“ICA”) or its affiliates. ICA, will only conduct such solicitation of an offer to buy any investment product or service offered by ICA, if at all, by (1) purported definitive documentation (which will include disclosures relating to investment objective, policies, risk factors, fees, tax implications and relevant qualifications), (2) to qualified participants, if applicable, and (3) only in those jurisdictions where permitted by law. Jay Hatfield or ICA may have a beneficial long or short position in securities discussed either through stock ownership, options, or other derivatives; nonetheless, under no circumstances does any article or interview represent a recommendation to buy or sell these securities. This discussion is intended to provide insight into stocks and the market for entertainment and information purposes only and is not a solicitation of any kind. ICA buys and sells securities on behalf of its fund investors and may do so, before and after any particular article herein is published, with respect to the securities discussed in any article posted. ICA’s appraisal of a company (price target) is only one factor that affects its decision whether to buy or sell shares in that company. Other factors might include, but are not limited to, the presence of mandatory limits on individual positions, decisions regarding portfolio exposures, and general market conditions and liquidity needs. As such, there may not always be consistency between the views expressed here and ICA’s trading or holdings on behalf of its fund investors. There may be conflicts between the content posted or discussed and the interests of ICA. Please reach out to the ICA for more information. Investors should make their own decisions regarding any investments mentioned, and their prospects based on such investors’ own review of publicly available information and should not rely on the information contained herein. ICA nor any of its affiliates accepts any liability whatsoever for any direct or consequential loss howsoever arising, directly or indirectly, from any use of the information contained herein. We have not sought, nor have we received, permission from any third-party to include their information in this article. Certain information contained in this document constitutes “forward-looking statements,” which can be identified by the use of forward-looking terminology such as “may,” “will,” “should,” “expect,” “anticipate,” “project,” “estimate,” “intend,” “continue” or “believe” or the negatives thereof or other variations thereon or other comparable terminology. Due to various risks and uncertainties, actual events or results may differ materially from those reflected or contemplated in such forward-looking statements.

October 2025 EDITION: Commentary and Economic Outlook

Infrastructure Capital — Wed, 05 Nov 2025 16:26:49 GMT

Economy

· The presser was hawkish with Powell emphasizing that a December cut was by no means assured. Stock and bond markets falling.

· The Fed cut rates as expected by 25bp and also announced the end of its balance sheet reduction also as expected. There was a surprise decent to the cut by Jeffrey Schmid of the Kansas City Fed with an expected dissent favoring a 50by cut by Stehen Miran. The statement was largely unchanged with no indication of future rate cuts. The bond market traded off slightly as the decent was a negative and the stock market was largely unchanged. We continue to expect a December rate cut and three more cuts in 2026 to get the Fed funds rate to the neutral rate of 2.75%. We project that core PCE will decline to the 2% area by the end of 2026 as the shelter component of CPI has finally started to reflect the decline in market rents. In fact, our real time measure of inflation utilizing market rents already has declined to the 2% are for core PCE.

· Friday’s inflation print was very bullish as the critical owner’s equivalent rent component declined to only .1% vs. .4% the prior month and 3.8% Y/Y. This decline is critical as it finally reflects market rent declines and implies that core PCE will decline to the Fed’s arbitrary 2% target by the end of 2026 as measured shelter inflation finally reflects the decline in market rents.

· The monetary base is the critical leading indicator of inflation and GDP growth. M1 and M2 have become outdated indicators after the GFC as banks now have massive excess reserves so the Fed can no longer control the size of bank balance sheets to restrict credit. In addition, non-bank lending has growth exponentially, further limiting the importance of M1 and M2 relatively to the monetary base.

o The monetary base is flat Y/Y vs. a normal growth rate of 5% which is deflationary and could lead to a recession.

· The only reason the US economy is not in recession is the housing sector has become less cyclical as home building has remained muted since the GFC with only an average of 1.1MM homes started with a peak of 1.8MM. During the 10 years prior to the GFC, starts averaged 1.7MM with a peak of 2.3MM.

· The “Hatfield Rule” is a recession indicator which states that if housing starts drop below 1.1MM there will be a recession. It is superior to the “Sahm” rule as housing is a leading indicator and employment is a lagging indicator.

· Consequently, there is a significant shortage of homes in the US of approximately 4MM homes. Also, there is now an active group of investors buying new homes to rent which provides for more resilient demand than has existed in the past. A decline in the housing sector accounted for 12 out of 13 post WWII recessions.

· We publish a real time CPI estimate that calculates the shelter component of CPI utilizing real time, national data from Zillow and Apartment list.

o CPI-R continues to be a be below CPI-U (Core CPI) and has been a reliable predictor of CPI-U.

· In addition, employment growth has stalled with less than 22k jobs created on average over the last 4 months according to the employer survey showing no growth over the last 7 months and over 850k jobs lost according to the household survey. Continuing claims also remain elevated at almost 2MM.

o Private investment GDP drives economic cycles.

· Tariffs are positive for economic growth in the medium to long term as the additional revenue from tariffs reduces the federal budget deficit and crowding out of private investment. Savings and investment are 70% correlated with GDP growth globally according to an IMF study.

o We forecast that the Federal Budget deficit declines to $1.45 Trillion in Fiscal 26 with tariffs contributing $400 billion of incremental revenue based on an expected average tariff rate of 17.5%.

Stock Market

· We recently raised our S&P year end 2025 target from 6,600 to 7,000 based on both continuing momentum in AI related earnings growth and increased visibility on Fed Rate cuts. Our target assumes a 23x multiple of 2026 S&P earnings of 305.

· We are also initiating a 2026 year-end target for the S&P of 7,700 based on a 23x multiple of our 2027 S&P earnings per share estimate of $335.

· Given the decline in rates and our bullish outlook on stocks, we recommend large cap dividend stocks, small cap stocks and high yield fixed income.

Bond Market

· We project that the 10-year treasury trades in the 3.5 - 4.0% range as the terminal rate of expected Fed funds trends down to the 2.75% area as reported inflation slowly reflects the decline in real time inflation.

· The economy is slowing and weakness in the US job market will likely force the Fed to cut 2-3 times this year. GDP growth has only averaged 1.5% this year and the interest sensitive construction and residential sectors have contracted over the last year in response to tight Fed policy.

· Importantly, 2 members of the 7-member Federal Reserve Board came out for a July rate cut. The market had failed to recognize that tariffs are recessionary/deflationary as the tax revenue reduces the deficit.

o US 10-year bonds are 70% correlated to the expected terminal Fed Funds rate and 25% correlated to global bonds (see attached slide). The budget deficit is relatively static and has been in the 5% of GDP range for years, so not a driver of interest rates in the short to medium term.

· Market implied policy rate continues to forecast 10-year yields with a 1% average spread.

· We recommend investors add high yield bonds and preferred stocks as we do not expect a big increase in defaults and we expect treasury rates to decline below 4% as the economy weakens.

Commodities

· We lowered our 2025 target on oil from $80 to $70 (range of $60-80) as it has become clear that Trump will use his influence with the Saudis and Russia to limit price increases despite tighter sanction on Iran. This policy will offset a good portion of one-time price increases from tariffs. We do not expect an increase in US production. We do see support for oil below $60 as most forecasters ignore the price elasticity of supply and demand for oil. Middle East wars will only impact prices if oil production facilities are destroyed.

· Artificial Intelligence and data centers have opened new growth prospects for natural gas midstream companies to supply gas fired power plants. Natural gas plants have some of the shortest times to build and we believe they are best positioned to supply reliable power quickly.

About Us

DISCLOSURE

This information is not an offer to sell, or solicitation of an offer to buy any investment product, security, or services offered by Jay Hatfield, or Infrastructure Capital Advisors, LLC, (“ICA”) or its affiliates. ICA, will only conduct such solicitation of an offer to buy any investment product or service offered by ICA, if at all, by (1) purported definitive documentation (which will include disclosures relating to investment objective, policies, risk factors, fees, tax implications and relevant qualifications), (2) to qualified participants, if applicable, and (3) only in those jurisdictions where permitted by law. Jay Hatfield or ICA may have a beneficial long or short position in securities discussed either through stock ownership, options, or other derivatives; nonetheless, under no circumstances does any article or interview represent a recommendation to buy or sell these securities. This discussion is intended to provide insight into stocks and the market for entertainment and information purposes only and is not a solicitation of any kind. ICA buys and sells securities on behalf of its fund investors and may do so, before and after any particular article herein is published, with respect to the securities discussed in any article posted. ICA’s appraisal of a company (price target) is only one factor that affects its decision whether to buy or sell shares in that company. Other factors might include, but are not limited to, the presence of mandatory limits on individual positions, decisions regarding portfolio exposures, and general market conditions and liquidity needs. As such, there may not always be consistency between the views expressed here and ICA’s trading or holdings on behalf of its fund investors. There may be conflicts between the content posted or discussed and the interests of ICA. Please reach out to the ICA for more information. Investors should make their own decisions regarding any investments mentioned, and their prospects based on such investors’ own review of publicly available information and should not rely on the information contained herein. ICA nor any of its affiliates accepts any liability whatsoever for any direct or consequential loss howsoever arising, directly or indirectly, from any use of the information contained herein. We have not sought, nor have we received, permission from any third-party to include their information in this article. Certain information contained in this document constitutes “forward-looking statements,” which can be identified by the use of forward-looking terminology such as “may,” “will,” “should,” “expect,” “anticipate,” “project,” “estimate,” “intend,” “continue” or “believe” or the negatives thereof or other variations thereon or other comparable terminology. Due to various risks and uncertainties, actual events or results may differ materially from those reflected or contemplated in such forward-looking statements.

When the Macro Backdrop Favors Small Caps: Late-Cycle Growth, Liquidity, and Valuation Gaps

Tue, 28 Oct 2025 15:07:51 GMT

Mega-cap technology stocks have ruled the last several years. Their strong performance has left small companies trailing, but that may be about to change. Late-cycle dynamics and easier monetary conditions are making the environment favorable to small caps — those economically sensitive companies that tend to be leaders as cycles turn. Now, with growth rolling over and liquidity gradually coming back, the stage is set for a return perhaps smaller-cap equity leadership.

Late-Cycle Dynamics

Market leadership rarely stays narrow. Throughout history, small-cap stocks have performed best at inflection points in the cycle — particularly around recessions and early recoveries¹. Late-cycle expansions are usually dominated by large-cap stocks, but investors expect slowing growth or policy easing at this stage, and smaller companies typically experience a bounce from their depressed level². A lot of those companies are healthier than a year ago, but their valuations remain way below those of more established peers. With portfolios being adjusted for the next stage in the cycle, small-caps might make up lost ground.

Liquidity Relief and Interest Rates

Small-caps have been stymied by high borrowing costs, as small firms generally have more of their liabilities funded through debt compared to big companies³. With the Federal Reserve halting rate hikes and markets pricing in eventual cuts, the pressure to fund begins to abate. Reduced interest costs free up money for investment, hiring, or deleveraging — all factors that can magnify earnings growth as credit conditions ease⁴. Historicaslly, falling rates have been an oversized tailwind to smaller companies relative to large-caps⁵. If the cost of capital keeps dropping and the economy continues to hold up, this could be an especially good environment.

Valuation Gaps and Domestic Exposure

The case for valuation may be the most compelling of all. Stocks are priced at exciting low valuations if you know where to look. Large-cap stocks on average trade at a bit less than three times sales. Small-caps are trading closer to one time ⁠— some of the most discounted since the early 1990s¹. In terms of price to book, large-caps trade a little over 5× vs. just ~2× for small-caps¹. That means investors are paying a big premium for Big Tech revenues while they can get to buy less-than-megabillion- dollar firms on the cheap. Crucially, some 75% of small-cap revenue comes from the U.S.⁶, so they are poised to benefit from U.S.-policy driven stimulus and a resurgence in domestic manufacturing¹ Unlike many large cap tech companies that trade at high multiples, almost all small caps stocks saw multiple compression during COVID selling despite having good underlying growth stories. The pace of earnings growth is also picking up as cost discipline, easing wage inflation and innovation in such areas as AI generate robust gains. Taken together, this could imply a turning point in relative performance.

Risks and Outlook

Small-caps continue to be both volatile and more vulnerable to economic shocks. They would probably be the first casualties in a sharp downturn. But if the cycle shifts to one of modest growth and lower rates, small-caps could get a boost both from multiple expansion and positive earnings expectations. Now after years of playing second fiddle to mega-caps, the sector’s risk-reward relationship looks enticing again. For investors who are concentrating exclusively on the market’s giants, it might be time to start broadening the lens to strategies that focus instead on smaller, undervalued businesses — which is where firms like Infrastructure Capital specialize.

Footnotes

Institutional Investor, “Why Small-Caps Could Outperform in the Next Economic Cycle,” July 21 2025.
Janus Henderson Investors, “Widening the Aperture: Multi-Asset Investing in a Late-Cycle Economy,” 2025.
Polen Capital, “Is Now a Turning Point for Small Caps?” October 16 2025.
Infrastructure Capital Substack, 2025.
Polen Capital, ibid.
Goldman Sachs Asset Management, “Mid-Year Outlook 2025: Broader Equity Horizons and Income Generation,” June 2025.
Goldman Sachs Asset Management, ibid.

About Us

DISCLOSURE

This information is not an offer to sell, or solicitation of an offer to buy any investment product, security, or services offered by Jay Hatfield, or Infrastructure Capital Advisors, LLC, (“ICA”) or its affiliates. ICA, will only conduct such solicitation of an offer to buy any investment product or service offered by ICA, if at all, by (1) purported definitive documentation (which will include disclosures relating to investment objective, policies, risk factors, fees, tax implications and relevant qualifications), (2) to qualified participants, if applicable, and (3) only in those jurisdictions where permitted by law. Jay Hatfield or ICA may have a beneficial long or short position in securities discussed either through stock ownership, options, or other derivatives; nonetheless, under no circumstances does any article or interview represent a recommendation to buy or sell these securities. This discussion is intended to provide insight into stocks and the market for entertainment and information purposes only and is not a solicitation of any kind. ICA buys and sells securities on behalf of its fund investors and may do so, before and after any particular article herein is published, with respect to the securities discussed in any article posted. ICA’s appraisal of a company (price target) is only one factor that affects its decision whether to buy or sell shares in that company. Other factors might include, but are not limited to, the presence of mandatory limits on individual positions, decisions regarding portfolio exposures, and general market conditions and liquidity needs. As such, there may not always be consistency between the views expressed here and ICA’s trading or holdings on behalf of its fund investors. There may be conflicts between the content posted or discussed and the interests of ICA. Please reach out to the ICA for more information. Investors should make their own decisions regarding any investments mentioned, and their prospects based on such investors’ own review of publicly available information and should not rely on the information contained herein. ICA nor any of its affiliates accepts any liability whatsoever for any direct or consequential loss howsoever arising, directly or indirectly, from any use of the information contained herein. We have not sought, nor have we received, permission from any third-party to include their information in this article. Certain information contained in this document constitutes “forward-looking statements,” which can be identified by the use of forward-looking terminology such as “may,” “will,” “should,” “expect,” “anticipate,” “project,” “estimate,” “intend,” “continue” or “believe” or the negatives thereof or other variations thereon or other comparable terminology. Due to various risks and uncertainties, actual events or results may differ materially from those reflected or contemplated in such forward-looking statements.

Small Caps & Rate Sensitivity: How Falling Rates Could Reshape Expectations

Fri, 10 Oct 2025 22:03:04 GMT

For much of the past few years, small-cap stocks have been market laggards, squeezed by rising borrowing costs and cautious investor sentiment. Now, with interest rates finally trending downward and inflation coming under control, the outlook for these “little guys” is starting to brighten. U.S. inflation has eased to under 3% as of August 2025 – a far cry from the multi-decade highs of 2022 – and the Federal Reserve has pivoted from raising rates to cutting them. In September 2025, the Fed delivered its first rate reduction of the year, shifting policy “from restraint to relief” as price pressures cool. This friendlier economic backdrop could reshape expectations for small caps, offering a tailwind to high-quality companies in the space.

Rate Relief and the Small-Cap Rebound

Interest-rate cuts act as a powerful catalyst for small-cap stocks. When central banks ease policy, two levers move at once: the discount rates investors use to value future earnings fall, and the real-world cost of debt drops for businesses. For smaller companies that rely heavily on external borrowing to fund operations, cheaper credit immediately boosts financial flexibility. Lower rates allow these firms to refinance existing loans on better terms and redirect more cash toward growth initiatives rather than interest payments. In other words, declining borrowing costs expand their available capital for expansion and investment.

Falling yields also buoy equity valuations. Because a larger share of a small-cap’s expected value comes from future growth, a lower discount rate makes those future earnings more valuable in today’s terms. That gives investors a reason to pay higher price multiples for quality small-cap stocks. Many of these names did not enjoy the big valuation multiple expansion that large tech companies saw in recent years, so there is room for an old-fashioned catch-up if conditions improve. Notably, small caps have begun to respond to the prospect of easier money: the Russell 2000 index climbed over 5% after Fed Chair Jerome Powell hinted at impending cuts in late August. Valuations look appealing – by some measures, U.S. small-cap stocks are near their cheapest levels relative to large caps in decades. As interest rates fall and risk appetite recovers, investors could see these discounted multiples start to rise, narrowing the long-standing valuation gap.

High-Quality Small Caps and Active Selection

Despite this optimistic backdrop, not every small-cap company will thrive in a lower-rate environment. The Russell 2000 is packed with weaker firms – including many unprofitable or highly leveraged ones – that might struggle even as credit conditions ease. This is where active management and careful stock selection are critical. A skilled active manager can sift through the universe of smaller stocks to separate the promising businesses from the “cheap for a reason” names. In practice, investors should favor companies with durable fundamentals and avoid those with shaky finances.

Key traits of high-quality small caps include:

· Balance sheet strength: manageable debt levels and ample cash, which help a company stay resilient as rates change.

· Earnings visibility: reliable revenue streams or profits that aren’t overly volatile, providing confidence that the business can weather economic bumps.

· Pricing power: an ability to raise prices or maintain margins without losing customers, which helps protect earnings if costs rise.

Focusing on these attributes helps identify sound businesses that can make the most of an improving backdrop. By carefully selecting smaller companies with stronger balance sheets and dependable earnings, investors can avoid the pitfalls of highly leveraged or speculative names. It’s wise to steer clear of stocks that are merely “cheap” due to fundamental problems, and instead seek out those with finances that won’t flinch as rates fall and have real pricing power in their industries. These quality-focused small caps are better positioned to capitalize on cheaper capital: they can invest in new projects, expand operations, or hire talent using lower-cost financing, all while maintaining the stability to survive any lingering economic uncertainty.

Reshaped Expectations

With interest rates coming down and the Fed shifting into easing mode, investor sentiment toward small-cap stocks may be on the mend. Historically, small caps have rebounded briskly during periods of monetary easing and early economic recovery. The combination of falling interest expenses, improving earnings prospects, and already-attractive valuations creates a favorable setup for a potential small-cap resurgence. As confidence builds that inflation is no longer an imminent threat and that the cost of capital is drifting lower, the narrative can broaden beyond the handful of mega-cap winners that led during the tightening cycle. In fact, we are beginning to see signs of this broadening: money that hid in big “safe” stocks is slowly starting to seek opportunities down the market cap spectrum, especially now that the risk of underperforming by ignoring smaller names is rising.

To be sure, risks remain – a serious economic downturn or any missteps in policy could temper this bullish case. But assuming a continued gradual decline in rates and stable growth, high-quality small-cap stocks stand to benefit disproportionately. Lower borrowing costs and a gentler macro climate give these companies room to surprise investors on the upside, whether through higher earnings or expanded multiples. In plain terms, falling rates change the math for small caps: debt gets cheaper, future profits count for more, and skepticism in the sector can give way to renewed interest. By staying selective and focusing on quality, investors can position themselves to tap into this changing tide. In a market long dominated by giants, the smallest players may be poised to finally punch above their weight as expectations adjust to a new rate reality.

About Us

DISCLOSURE

This information is not an offer to sell, or solicitation of an offer to buy any investment product, security, or services offered by Jay Hatfield, or Infrastructure Capital Advisors, LLC, (“ICA”) or its affiliates. ICA, will only conduct such solicitation of an offer to buy any investment product or service offered by ICA, if at all, by (1) purported definitive documentation (which will include disclosures relating to investment objective, policies, risk factors, fees, tax implications and relevant qualifications), (2) to qualified participants, if applicable, and (3) only in those jurisdictions where permitted by law. Jay Hatfield or ICA may have a beneficial long or short position in securities discussed either through stock ownership, options, or other derivatives; nonetheless, under no circumstances does any article or interview represent a recommendation to buy or sell these securities. This discussion is intended to provide insight into stocks and the market for entertainment and information purposes only and is not a solicitation of any kind. ICA buys and sells securities on behalf of its fund investors and may do so, before and after any particular article herein is published, with respect to the securities discussed in any article posted. ICA’s appraisal of a company (price target) is only one factor that affects its decision whether to buy or sell shares in that company. Other factors might include, but are not limited to, the presence of mandatory limits on individual positions, decisions regarding portfolio exposures, and general market conditions and liquidity needs. As such, there may not always be consistency between the views expressed here and ICA’s trading or holdings on behalf of its fund investors. There may be conflicts between the content posted or discussed and the interests of ICA. Please reach out to the ICA for more information. Investors should make their own decisions regarding any investments mentioned, and their prospects based on such investors’ own review of publicly available information and should not rely on the information contained herein. ICA nor any of its affiliates accepts any liability whatsoever for any direct or consequential loss howsoever arising, directly or indirectly, from any use of the information contained herein. We have not sought, nor have we received, permission from any third-party to include their information in this article. Certain information contained in this document constitutes “forward-looking statements,” which can be identified by the use of forward-looking terminology such as “may,” “will,” “should,” “expect,” “anticipate,” “project,” “estimate,” “intend,” “continue” or “believe” or the negatives thereof or other variations thereon or other comparable terminology. Due to various risks and uncertainties, actual events or results may differ materially from those reflected or contemplated in such forward-looking statements.

Beyond Deficits: Why Fiscal Worry Isn’t Moving the Bond Market (Yet)

Sun, 05 Oct 2025 19:57:11 GMT

Soaring U.S. budget deficits were expected to prompt surging bond yields, but the Treasury market has remained strangely calm. Investors are still much more preoccupied with the Federal Reserve’s policy and growth than they are with Washington’s fiscal arithmetic. The latest data made that evident: a lackluster September jobs report caused Treasury yields to fall, as markets began penciling in more aggressive rate cuts rather than higher borrowing costs. ¹ In reality, the 10-year Treasury yield typically follows Fed expectations and inflation trends — not the magnitude of the deficit. We estimate the 10-year yield has about 70% correlation with the expected Fed funds rate, while deficits, which have run at just below 5% of GDP for years, matter little in the short term. ²

That view helps explain the markets’ nonchalance. U.S. Treasurys are drawing steady demand from domestic and international investors even as debt in the U.S. reaches record levels. The dollar’s status as a reserve currency, deep capital markets and a still-credible central bank anchors investor confidence. When credit ratings were slashed earlier this year, hardly a ripple was felt in yields before they resumed their narrow trading range. ² So far there’s little sign of “fiscal dominance” — a situation in which debt fears start to dictate monetary policy. If that were happening, we’d probably be observing the sort of market dislocations that recently plagued Britain and Japan — long-term rates have soared there as budgetary stress rose. ¹ U.S. bonds, in comparison, continue to be the global standard for liquidity and safety.

There is a certain irony afloat today in fiscal dynamics. And tariffs that many economists used to worry about as inflationary have turned out to be mildly deflationary and slightly revenue-positive, taking the edge off deficit projections. New trade revenues — which we estimate at several hundred billion dollars a year — could lower the deficit to something like 4 percent of G.D.P. by 2026. ³ Those hopes have helped fuel investor confidence that the rate of debt expansion remains tractable in the short term.

What the Fed does in the months ahead in response to slowing growth is far more important. With the economy losing steam — amid softening construction, housing and labor markets — the central bank is widely expected to cut rates again before the end of the year. ² We expect the 10-year Treasury to trade between 3.5%–4.0% as the terminal policy rate moves lower toward 2.75%. ² If that view holds, it makes a case for staying exposed to fixed income.

For yield-oriented investors, this is still a reality that favors bonds, preferrreds, credit over cash. Default risk seems contained, and with an orderly parade of Treasury yields heading lower, could lead to a price appreciation / income generation combo. Fiscal fretting may be dominating headlines, but the bond market is sending a subtler message: policy and growth — not politics — are calling the shots when it comes to yields. Until deficits begin spurring inflation or investor rush for the exits, bonds are less about fiscal fear than fundamentals.

Footnotes

Dhara Ranasinghe, “Global Bond Markets Stabilize, for Now, as Fiscal Storm Looms,” Reuters, September 3, 2025.
Infrastructure Capital Advisors, September 2025 Commentary and Economic Outlook, September 2025.
Infrastructure Capital Advisors, Trade Deals Imply Significantly Lower Budget Deficits, August 2025.
Bipartisan Policy Center, “Tracking the Federal Deficit: August 2025,” Deficit Tracker, September 17, 2025.
Infrastructure Capital Advisors, “Infrastructure Capital Bond Income ETF (BNDS) Overview,” InfraCapFunds.com, accessed October 2025.

About Us

DISCLOSURE

This information is not an offer to sell, or solicitation of an offer to buy any investment product, security, or services offered by Jay Hatfield, or Infrastructure Capital Advisors, LLC, (“ICA”) or its affiliates. ICA, will only conduct such solicitation of an offer to buy any investment product or service offered by ICA, if at all, by (1) purported definitive documentation (which will include disclosures relating to investment objective, policies, risk factors, fees, tax implications and relevant qualifications), (2) to qualified participants, if applicable, and (3) only in those jurisdictions where permitted by law. Jay Hatfield or ICA may have a beneficial long or short position in securities discussed either through stock ownership, options, or other derivatives; nonetheless, under no circumstances does any article or interview represent a recommendation to buy or sell these securities. This discussion is intended to provide insight into stocks and the market for entertainment and information purposes only and is not a solicitation of any kind. ICA buys and sells securities on behalf of its fund investors and may do so, before and after any particular article herein is published, with respect to the securities discussed in any article posted. ICA’s appraisal of a company (price target) is only one factor that affects its decision whether to buy or sell shares in that company. Other factors might include, but are not limited to, the presence of mandatory limits on individual positions, decisions regarding portfolio exposures, and general market conditions and liquidity needs. As such, there may not always be consistency between the views expressed here and ICA’s trading or holdings on behalf of its fund investors. There may be conflicts between the content posted or discussed and the interests of ICA. Please reach out to the ICA for more information. Investors should make their own decisions regarding any investments mentioned, and their prospects based on such investors’ own review of publicly available information and should not rely on the information contained herein. ICA nor any of its affiliates accepts any liability whatsoever for any direct or consequential loss howsoever arising, directly or indirectly, from any use of the information contained herein. We have not sought, nor have we received, permission from any third-party to include their information in this article. Certain information contained in this document constitutes “forward-looking statements,” which can be identified by the use of forward-looking terminology such as “may,” “will,” “should,” “expect,” “anticipate,” “project,” “estimate,” “intend,” “continue” or “believe” or the negatives thereof or other variations thereon or other comparable terminology. Due to various risks and uncertainties, actual events or results may differ materially from those reflected or contemplated in such forward-looking statements.

The Fed Finally Cuts Rates: Why Small Caps Are Suddenly Soaring

Wed, 01 Oct 2025 14:01:34 GMT

When interest rates fall, not all stocks respond equally. The Federal Reserve’s recent rate cut has ignited a remarkable rally in small cap stocks with the Russell 2000 index significantly outpacing the broader market. This dramatic response reveals an important dynamic that savvy investors should understand. Small companies typically benefit more from lower borrowing costs than their larger counterparts.

Why does this happen? Small-cap companies carry heavier debt burdens relative to large corporations. These smaller businesses often lack sufficient income to fund operations and growth initiatives internally, forcing them to rely more heavily on borrowed money. Many cannot access bond markets, leaving them dependent on bank loans with variable interest rates that adjust quickly when the Fed moves. On average, the debt profile of Russell 2000 companies skews much more heavily towards floating rate debt than its S&P 500 counterparts.

This structural difference creates a fundamental rate sensitivity. When the Fed cuts rates after a prolonged tightening cycle, small caps experience immediate relief through reduced borrowing costs, improved profit margins and enhanced financial flexibility. Historical patterns confirm this relationship with small companies consistently outperforming during declining rate periods.

Current valuations make this opportunity particularly compelling. Small caps trade at historically deep discounts relative to large caps. This valuation gap creates potential for significant upside if economic conditions remain supportive.

Certain sectors within the small-cap universe stand to benefit most. Industrials and materials companies gain from reshoring trends. Financial firms typically increase lending activity as rates decline. Real estate stocks advance as mortgage rates fall, potentially ending a prolonged market freeze.

However, investors should remain mindful of risks. Small caps face greater vulnerability during economic contractions. Proposed tariff increases could generate inflationary pressures and disrupt supply chains for many small cap operations. Persistent inflation might limit the Fed’s ability to continue cutting rates.

The current environment creates particularly favorable conditions for income-generating small caps with strong free cash flow fundamentals. These companies combine the growth potential of small caps with the stability of consistent cash generation, a valuable combination as the economy navigates this transition in monetary policy.

Small caps represent distinct investment instruments rather than simply higher risk alternatives to large caps. Their unique response to changing economic conditions creates specific opportunities during rate-cutting cycles that thoughtful investors can leverage within a diversified portfolio.

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This information is not an offer to sell, or solicitation of an offer to buy any investment product, security, or services offered by Jay Hatfield, or Infrastructure Capital Advisors, LLC, (“ICA”) or its affiliates. ICA, will only conduct such solicitation of an offer to buy any investment product or service offered by ICA, if at all, by (1) purported definitive documentation (which will include disclosures relating to investment objective, policies, risk factors, fees, tax implications and relevant qualifications), (2) to qualified participants, if applicable, and (3) only in those jurisdictions where permitted by law. Jay Hatfield or ICA may have a beneficial long or short position in securities discussed either through stock ownership, options, or other derivatives; nonetheless, under no circumstances does any article or interview represent a recommendation to buy or sell these securities. This discussion is intended to provide insight into stocks and the market for entertainment and information purposes only and is not a solicitation of any kind. ICA buys and sells securities on behalf of its fund investors and may do so, before and after any particular article herein is published, with respect to the securities discussed in any article posted. ICA’s appraisal of a company (price target) is only one factor that affects its decision whether to buy or sell shares in that company. Other factors might include, but are not limited to, the presence of mandatory limits on individual positions, decisions regarding portfolio exposures, and general market conditions and liquidity needs. As such, there may not always be consistency between the views expressed here and ICA’s trading or holdings on behalf of its fund investors. There may be conflicts between the content posted or discussed and the interests of ICA. Please reach out to the ICA for more information. Investors should make their own decisions regarding any investments mentioned, and their prospects based on such investors’ own review of publicly available information and should not rely on the information contained herein. ICA nor any of its affiliates accepts any liability whatsoever for any direct or consequential loss howsoever arising, directly or indirectly, from any use of the information contained herein. We have not sought, nor have we received, permission from any third-party to include their information in this article. Certain information contained in this document constitutes “forward-looking statements,” which can be identified by the use of forward-looking terminology such as “may,” “will,” “should,” “expect,” “anticipate,” “project,” “estimate,” “intend,” “continue” or “believe” or the negatives thereof or other variations thereon or other comparable terminology. Due to various risks and uncertainties, actual events or results may differ materially from those reflected or contemplated in such forward-looking statements.

Saudi Arabia Boosts Oil Output; Global Prices Take A Hit

Wed, 24 Sep 2025 14:02:54 GMT

Saudi Arabia has recently increased its crude oil production to reclaim market share rather than maintain price stability. This strategic pivot creates ripple effects throughout global energy markets, affecting producers and consumers worldwide.

The Kingdom’s Market Share Strategy

OPEC’s influence has diminished substantially over the past decade. The organization’s market share fell from 40% to under 25% in recent years. In response, Saudi Arabia began unwinding production cuts ahead of schedule, starting in April 2025.

The Kingdom enjoys a significant competitive advantage with remarkably low production costs compared to other producers. This cost efficiency allows Saudi Arabia to withstand extended periods of lower prices while putting pressure on higher-cost producers.

The strategy serves multiple purposes: reclaiming market share, disciplining quota violations within OPEC+ and asserting Saudi leadership within the organization. However, this approach creates fiscal challenges for the Kingdom, which requires higher oil prices to balance its budget.

US Shale Faces Mounting Pressure

Many US producers have reduced capital spending and drilling activity in response to lower prices. As Travis Stice, CEO of Diamondback Energy, aptly stated: “We are taking our foot off the accelerator as we approach a red light.” Production from US lower 48 states has already begun declining from recent peaks, potentially marking the first annual drop since the fracking boom began.

Global Economic Impacts

The current market dynamics reveal a significant supply-demand imbalance. Forecasts suggest prices will remain under pressure through 2026 as production increases continue while inventory builds grow.

This price environment creates winners and losers. Major oil exporters face budget pressures, while oil-importing economies benefit from reduced energy costs. Lower oil prices function similar to tax cuts for importing nations such as India, Japan and European countries, easing inflationary pressures and improving trade balances.

Investment Implications

Saudi Arabia’s production strategy triggers long-term structural changes in global energy markets. The Kingdom accepts short-term fiscal challenges to force consolidation across the energy sector as higher-cost producers exit the market.

For investors, this environment requires careful positioning. Companies with low production costs and strong balance sheets can weather the challenging price environment, while high-cost producers face operational difficulties until market conditions improve.

Oil-importing economies stand to benefit from sustained lower prices. The current price cycle will ultimately determine which energy companies maintain sustainable operations through this period of market adjustment.

S&P 2025 Target Raised to 7,000 on AI Momentum and Fed Clarity

Infrastructure Capital — Mon, 15 Sep 2025 13:23:44 GMT

We are raising our S&P 500 Index year end 2025 target from 6,600 to 7,000 based on both continuing momentum in AI related earnings growth and increased visibility on Fed Rate cuts. Our target assumes a 23x multiple of 2026 S&P earnings of 305. Recent earnings reports from Broadcom and Oracle validate the powerful growth opportunities from the build out of AI infrastructure required for both consumer and corporate applications. In addition, our call that the Fed would be required to lower rates due to the slowing of the interest rate sensitive sectors has finally come to fruition after delays caused by BLS data collection flaws. Expectations of Fed rate cuts have driven 10-year treasury rates close to our target range of 3.5-4.0%, which is critical to supporting a 23x PE ration. Every 25bp of increase in interest rates lowers our target multiple on the S&P by one point. We now project that GDP growth in 2026 will accelerate to the 3% range from this year’s 1-2% as housing and construction recover from the Fed’s tightening cycle, and the AI boom continues to stimulate investment in software, equipment, data centers and power infrastructure (see chart of investment spending components below). A 3% GDP growth rate will be a strong tailwind for our 305 2026 S&P earnings estimate of 305.

We are also initiating a 2026 year-end target for the S&P 500 Index of 7,700 based on a 23x multiple of our 2027 S&P earnings estimate of 335. We also project that the 10-year treasury trades in the 3.5-4.0% range as the terminal rate of expected Fed funds rate trends down to the 2.75% area as reported inflation slowly reflects the decline in real time inflation. The 10-year treasury has historically traded approximately 1.05% over the Fed Funds rate (see figure below).

Private investment drives economic cycles:

Market implied policy rate continues to forecast 10-year yields:

OPEC Production Surge: What It Really Means for Oil Markets in 2025

Fri, 12 Sep 2025 14:02:47 GMT

The global oil environment has dramatically shifted as OPEC agreed to increase production after years of limiting supply. This strategic pivot represents more than routine market adjustment. It may be a more calculated maneuver that could have implications for energy investors worldwide.

OPEC+ has been methodically unwinding production cuts since April, culminating in September's substantial increase. The timing coincides with crude prices recovering from spring lows. This suggests that the cartel views current market conditions as sufficiently robust to absorb additional supply.

The increases effectively reverse substantial cuts implemented in 2023, returning significant volume to global markets. Those cuts helped to keep prices elevated in order to enhance profitability. With this reversal, the International Energy Agency warns that surplus risks will build from late 2025 and possibly into 2026. This could potentially pressure prices if demand fails to rise accordingly.

Politics also likely play a role in this decision. The United Arab Emirates, for example, secured an additional increase beyond the group arrangement, highlighting growing influence within OPEC+. This treatment reveals a balancing act OPEC leadership navigates among competing member interests.

Despite production increases, oil prices have remained surprisingly resilient. Three factors explain this stability:

● the gap between announced and actual output additions where final numbers are often different from estimates

● tight global inventories

● robust Chinese demand

European and U.S. commercial crude stocks recently fell below five-year averages, indicating something of a buffer against short-term oversupply risk.

Market structure also provides additional insight into current dynamics. Brent crude prices maintain backwardation where near-term contracts trade at premiums to longer-dated ones (though time spreads have narrowed). This pattern reflects firm near-term increased demand but softer forward expectations.

OPEC appears to be targeting the U.S. shale market. While OPEC nations produce oil at relatively low costs, U.S. shale operators require substantially higher prices to drill profitably. By potentially pushing prices lower, OPEC could squeeze high-cost producers from the market. That’s a potentially tactical signal that gives an advantage to lower-cost producers without declaring an overt price war.

This approach creates significant fiscal challenges for OPEC members themselves. Many nations require elevated oil prices to balance government budgets, creating a tug of war among members between market share preservation and financial stability.

For energy investors, we feel that this complex scenario demands careful monitoring. OPEC maintains flexibility to adjust production based on evolving market conditions. The coming months will reveal whether their strategy successfully balances competing objectives or creates unintended consequences.

Jay Hatfield Quoted by President Trump on Social Media!

Infrastructure Capital — Tue, 09 Sep 2025 22:47:02 GMT

In case you missed it, Infrastructure Capital Founder, CEO and Portfolio Manager Jay Hatfield was quoted by President Donald Trump on his Truth Social platform following his appearance on Fox Business with Maria Bartiromo earlier today.

Check it out!

https://x.com/INFRACAP_CMO/status/1965421611731091468

SCAP: Seeking to Reducing Small-Cap Volatility While Generating Higher Income

Fri, 05 Sep 2025 14:02:39 GMT

Plenty has been said about the flaws of passive small-cap ETFs that track the Russell 2000. One of the biggest issues is the index’s sheer breadth and relatively loose inclusion criteria, which allow hundreds of “zombie” companies (businesses with little to no profitability) to remain in the mix.

That in turn contributes to another common knock against the index: volatility. Because of their size and weaker fundamentals, many Russell 2000 constituents can swing wildly, making the index much more volatile than large-cap benchmarks like the S&P 500. For some investors, that’s reason enough to avoid small caps altogether.

We believe the InfraCap Small Cap Income ETF (SCAP) offers a more thoughtful alternative. By combining actively managed, value-conscious stock selection with the ability to tactically allocate to preferred shares and write options, SCAP is designed to potentially dampen volatility while boosting income.

SCAP: Seeking Lower Volatility

SCAP doesn’t attempt to replicate the full investable universe of U.S. small caps. Instead, the strategy narrows the field by focusing on three attributes that historically correlate with stronger fundamentals and lower volatility.

First is profitability. Some small-cap stocks generate little to no earnings, which adds to their volatility and lowers the reliability of future returns. SCAP, in contrast, targets companies with positive earnings and durable margins. These are businesses with demonstrated financial discipline and a clearer path to compounding returns over time.

Second is the presence of a dividend. Dividend payers are relatively rare in the small-cap space, so identifying them often reveals businesses with healthier cash flows, more mature operations, and shareholder-friendly capital allocation. It also adds an income component to the portfolio that can help cushion volatility.

Finally, SCAP emphasizes valuation. Target holdings must trade at reasonable multiples of both growth and earnings. That avoids speculative small caps with sky-high price-to-sales ratios or structurally unprofitable business models that rely on capital markets to survive.

Taken together, this approach filters out the weakest links and concentrates the portfolio in higher-quality small caps: businesses that are generating cash, returning capital, and not simply surviving on promises.

Over the period shown in the chart below, that quality tilt has translated into consistently lower volatility for SCAP compared to ETFs tracking the Russell 2000 index, even during dislocations like April/May 2025's tariff-induced selloff.

SCAP: Seeking Higher Yield

The Russell 2000 Index isn’t known for its income potential. Many of the small-cap stocks it includes are still in the early stages of development, meaning they often lack the free cash flow or stability required to support a regular dividend. As a result, ETFs tracking this benchmark may only offer a yield of around 1%, give or take.

In contrast, SCAP pays a 6.17% 30-day SEC yield, as of 6/30/25. Part of that is due to its dividend-focused screening process, which favors profitable small caps that already return capital to shareholders. But SCAP also structurally enhances its income profile through two additional sources.

The first is options writing. Even though the portfolio itself is actively managed and differs meaningfully from the Russell 2000, SCAP opportunistically writes index options on the Russell 2000 or ETFs to capture volatility premiums. This allows the fund to tap into the higher implied volatility of the benchmark without owning many of the lower-quality names responsible for it.

The second is modest leverage. SCAP can deploy between 10% and 30% notional leverage to amplify exposure to dividend-paying holdings and increase capital allocated to its covered call strategy. This boosts distributable income while maintaining exposure to higher-quality businesses.

While yield isn’t the whole story, SCAP’s advantage isn’t limited to income alone. As shown in the chart below, it also led the Russell 2000 ETF (IWM) on a total return basis over the past year, with distributions reinvested, as of 8/8/25.

Performance data quoted represents past performance. Past performance does not guarantee future results. Investment return and principal value will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. Please call 800-617-0004 for performance data current to the most recent month end. SCAP’s inception date is December 11, 2023.

The Russell 2000 Index is a small-cap U.S. stock market index that makes up the smallest 2,000 stocks in the Russell Index. It was started by the Frank Russell Company in 1984. The index is maintained by FTSE Russell, a subsidiary of the London Stock Exchange Group.

Free Cash Flow (FCF) is a financial metric representing the cash a company generates from its operations after accounting for necessary business expenditures, such as operating expenses and investments in assets (capital expenditures).

About Us

DISCLOSURE

The information contained herein represents our subjective belief and opinions and should not be construed as investment, tax, legal, or financial advice. Investors should consider the investment objectives, risks, charges, and expenses carefully before investing. Please read the prospectus carefully before investing. For more information about the Fund, Fund strategies or Infrastructure Capital, please reach out to Craig Starr at 212- 763-8336 (Craig.Starr@icmllc.com). The Funds are distributed either by Quasar Distributors, LLC or by VP Distributors, LLC, an affiliate of Virtus ETF Advisers, LLC. ICAP, SCAP, and BNDS ETFs are distributed by Quasar Distributors LLC. PFFA, PFFR, and AMZA ETFs are distributed by VP Distributors, LLC an affiliated of Virtus ETF Advisers, LLC.

Fund Risks

A word about ICAP Risk: Investing involves risk, including possible loss of principal. An investment in the Fund may be subject to risks which include, among others, investing in equities securities, dividend paying securities, utilities, preferred stocks, leverage, short sales, small-, mid- and large- capitalization companies, real estate investment trusts, master limited partnerships, foreign investments and emerging, debt securities, depositary receipts, market events, operational, high portfolio turnover, trading issues, options, active management, fund shares trading, premium/discount risk and liquidity of fund shares, which may make these investments volatile in price. Foreign investments are subject to risks, which include changes in economic and political conditions, foreign currency fluctuations, changes in foreign regulations, and changes in currency exchange rates which may negatively impact the Fund's returns. Small and Medium-capitalization companies, foreign investments, options, leverage, short sales, and high yielding equity and debt securities may be subject to elevated risks. The Fund is a recently organized investment company with no operating history. Please see prospectus for discussion of risks. ICAP fund distributor, Quasar Distributors, LLC.