Fear pays the highest yield.

Hi ,

Remember 2019, 2008, 2001? The bottom dropped out and no one could tell how far it would go. Most of us lost real money in that cycle; fear prevailed. Others came out ahead. I told myself that next time I saw my window, I would grab it. 

Lately, I’ve been obsessing over two charts: The unemployment rate and the Fed Funds Rate. 

Unemployment has ticked higher all year and payrolls suggest it continues to trend upward. Meanwhile, after 9 months of holding steady, the Fed blinked, and signs point to another rate cut before year end. 

These two charts show something is in the fall air: anxiety and fear. This market cycle feels familiar. Just as in past easing cycles, this means opportunity is parading around as risk. 

This time around, I’m ready to accelerate into its curves.

Every cycle follows a rhythm, but it never feels familiar while you’re in it.
Inflation cools. Labor softens. Policy pivots. Capital starts to move.

We’re in that stretch now—the handoff between scarcity and liquidity.

The headlines will focus on risk, but the signals point elsewhere: credit spreads are tightening, borrowing costs are easing, and capital is slowly re-entering the system.

I’ve seen this turn before. It always feels uncertain in real time, then obvious in hindsight.

The policy pivot marks the start of a new wealth cycle—the moment when capital moves from defense to growth. Today, we’ll look at what the data means and where we might be heading next.

Inside this week’s issue:

• Shift Your Stack: Unpacking The Classic Cycle and how this moment mirrors past pivots.

• Case Study: How early credit deployment delivered double-digit IRRs.

• Playbook: Frameworks for refinancing, capturing yield, and structuring portfolios through the pivot.

The goal is simple: read the signals early enough to act while the opportunity still exists.

The next phase is already forming.

Let’s dive in,

— Walker Deibel
WSJ & USA Today Bestselling Author of Buy Then Build
Founder, Build Wealth

P.S. Our BuildFlow I Credit Fund has reopened to new investors. It’s diversified, over-collateralized, and currently delivering a run rate of 11.4% cash-on-cash with just a two-year lockup and an option to compound.We’re adding new assets this quarter. Check out the full details on BuildFlow I at our investor portal: buildwealth.investnext.com. 

SHIFT YOUR STACK

The Classic Cycle

The Fed just blinked. They finally reversed course and began cutting rates, signaling they are seeing the shifts in the landscape.

Every tightening cycle since 1980 has followed the same rhythm. The Fed raises rates until something gives. Unemployment starts to climb and policy begins to ease.

That setup has arrived again.

• The Fed Funds Rate is rolling over.

• Unemployment crossed 4.3% in the latest Federal data.

There’s no need to wait for anyone to make the “official” recession call. 

The Fed usually always makes cuts before the pain peaks. By the time unemployment numbers dominate headlines, forward-looking capital has already moved.

It’s easy to see only the risk right now. But when policy shifts from tightening to easing, markets don’t shut down—they reset. That’s usually when smart capital starts finding new opportunities.

Where Are We Now

Inflation has cooled to about 3%, and the Fed Funds Rate sits near 4.0–4.25% after the first official cut. Unemployment appears to still be rising, but growth hasn’t stalled.

This combination—moderating inflation and a softening labor market—marks the pivot zone. The Fed tightens until the growth data bends, then opens liquidity.

We’ve seen this pattern before. Think back to 1990, 2001, 2008, and 2020. In every case, liquidity returned to markets months before sentiment recovered.

Why Most Investors Miss It

Most investors wait for clarity. They want multiple cuts, calmer news, and smoother charts before committing capital.

But by then, the advantage has diminished.
Once the first cut lands, the repricing begins fast. Spreads narrow, valuations rise, and yields slide.

Liquidity always moves before sentiment.

That timing gap is where disciplined investors build the next compounding leg.

Each cycle rewarded investors who acted just as policy shifted, not after.

Private markets led every recovery because they respond directly to liquidity instead of sentiment.

The Data Behind the Signals

• Unemployment: 4.3%, roughly one point above the cycle low. Every easing phase since 1980 has started at this level.

• Inflation: 3.0% CPI, 2.9% Core PCE—steady enough for cuts without reigniting inflation.

• Policy Rate: 4.0–4.25% after September’s first cut, with futures pricing roughly 60% odds of another by year-end.

• Treasury Curve: The 10-year yield sits near 4.0%, and the 2–10 spread just turned positive for the first time in two years—a textbook early-cycle sign.

• Lag Window: On average, about four months separate the first rate cut and the next market bottom.

• Private Market Edge: Private credit and real assets outperform public equities by 250–400 basis points annually during the first 18 months after a pivot.

This environment resembles 1995 and 2019 more than 2008. Growth is slowing but intact. Inflation has normalized without destroying demand.

That balance creates a rare setup where yield remains elevated even as risk declines.

What’s different this time is scale. The private markets are no longer a niche corner of the economy—they’ve become a multi-trillion-dollar force standing beside public markets. Private credit now serves as the transmission mechanism for liquidity, absorbing capital faster than banks ever could. Combined with the speed of data, policy, and digital distribution, this cycle is likely to move faster than any in recent history.

This Cycle Is Familiar but Larger

The structure hasn’t changed, but the magnitude has. The Fed’s balance sheet has growth by more than $7 trillion since 2020. That liquidity is still sitting there, ready to be moved. 

Private credit is still priced cautiously. Yields are still near 12% which shows investors are cautious in the tightening cycle. Once the Fed cuts again, those yields will likely drop to 8–9%, raising the value of current holdings and creating meaningful gains before the market catches on. Investors benefit twice—through ongoing income and the rising market value of their holdings. That revaluation creates mark-to-market gains before new investors even enter the trade.

Cuts don’t change borrowing costs overnight. They change where the money goes — and open up the flow.

• Private credit managers refinance at lower costs.

• Real estate investors re-enter stabilized assets with refinancing tailwinds.

• Private equity firms raise new vintages to buy growth at compressed multiples.

This phase is what experienced capital calls accumulation—building durable positions while others hesitate. 

Reading the Signals

The Fed doesn’t lead the market. It follows the pressure.

What we see now is: rising unemployment, stable inflation, and early signs of easing.

The next six to twelve months form a narrow but powerful window. Yields remain high, valuations are still reasonable, and liquidity is expanding.

This is when portfolios compound the fastest. Invest on clear signals rather than wait for consensus. This week’s Playbook outlines a plan to use these signals for smart positioning. 

For investors who want to see the evidence behind this setup, our latest report, Fed Rates as Signals for Investors, breaks down five decades of Fed cycles and regression data showing how private credit, housing, and equity re-rate when policy turns.

Read the full report: Fed Rates as Signals for Investors.

CASE STUDY

The Early-Mover Advantage

In July 2020, just months after the Federal Reserve slashed rates to near zero, Adams Street Partners launched its Private Credit Fund II-A.

Markets were chaotic. Public equities were volatile. Institutional allocators were frozen.

Inside that uncertainty, Adams Street saw a setup.

Adams Street’s second Private Credit program closed oversubscribed with $2.1B+ committed ($3+ billion including leverage), and deployed into senior-secured, floating-rate loans to sponsor-backed middle-market businesses. It was the moment when liquidity had returned but confidence had not.

The Opportunity Others Missed

Most lenders were waiting for signs of stability — tighter spreads, predictable cash flows, and a clearer macro backdrop.
Adams Street moved while those signals were still mixed.

Spreads were wide. Borrowers were strong. Competition was minimal.

They focused on loans with 10–12% coupons, first-lien collateral, and loan-to-value ratios under 45%. The floating-rate structure gave them income protection and upside as yields normalized.

This wasn’t opportunism; it was a disciplined response. Their credit team had seen the same setup in 2009 and 2015. When liquidity turns, spreads compress — and those who deploy early capture it as both income and appreciation.

By the end of 2024, Fund II-A reported a 13.7% net IRR.
Then by March 2025, performance ticked up to 13.99%, far ahead of public credit indices averaging half that return.

Those gains came from timing and structure.
They entered before the herd and built downside protection into every deal.

Their success reflects what our current data shows in the Fed-cycle analysis: credit leads the recovery because liquidity reaches it first.

Why Their Strategy Worked

The real edge wasn’t information — it was conviction.
Adams Street acted while uncertainty still dominated.

They didn’t wait for spreads to tighten or unemployment to peak. They underwrote through noise, not after it.

The fund’s design captured three compounding effects:

• Yield premium at entry.
  

• Spread compression as markets normalized.
  

• Floating-rate upside during rate transition.

Each reinforced the next. The result was equity-like returns from credit-level risk.

Adams Street displayed it best: the first capital to move after a policy shift often earns the best returns.

Private credit rewards discipline, not prediction. The win came from preparation: having a strategy, a team, and a mandate ready when the window opened.

While others were searching for confirmation, Adams Street was writing term sheets.

Build readiness before the signal arrives. By the time confidence returns, spreads will already be gone.

Next, we’ll break down how to apply that discipline in your own portfolio — practical frameworks for structuring yield, cash flow, and optionality during the first stage of the easing cycle.

THE PLAYBOOK

How to Play a Fed Pivot Without Chasing Headlines

Most investors realize the cycle has shifted only after the opportunity has already moved.
This easing cycle is in the stretch where structure and timing define outcomes.

Here’s a proven playbook for navigating the early easing phase—how to capture yield, reset liabilities, and position yourself  for the next compounding window.

1. Term Out Expensive Debt

Every rate cycle creates a brief refinancing window, and this one has begun.

If your long-term borrowing cost improves by 100 to 150 basis points over last year, begin extending maturities.

You don’t need to refinance everything; focus on the debt that most improves margin or extends duration.

Partial refinancing and selective ten-year paper create flexibility as liquidity expands. The goal is to stay funded through the next phase of growth, not to chase the absolute bottom.

2. Capture Yield While It Exists

Private credit remains the most asymmetric opportunity in the current environment.

Spreads are still elevated at 10–12%+ returns on senior-secured loans—but those yields shrink once institutional capital rotates back in.

This is the income phase of the cycle. Own quality yield while fear still inflates pricing.

Look for:

• Senior-secured or unitranche structures

• Duration under three years

• Collateral coverage above 2× EBITDA

• Sponsor-backed borrowers with predictable cash flow

The edge comes from underwriting credit risk while sentiment is still defensive.

3. Rebuild the Liquidity Ladder

Liquidity discipline is the foundation of compounding through a pivot.

Align each layer of your portfolio to a clear purpose:

• Base (0–2 years): Private credit and income-producing real assets for consistent cash flow.

• Middle (2–5 years): Real estate equity and secondaries positioned for yield and growth.

• Top (5–10 years): Growth equity and buyouts for long-term appreciation.

Each layer funds the next as liquidity increases. The structure ensures that cash flow supports reinvestment rather than waiting for macro clarity.

4. Stage Capital for The Next Cycle

The next twelve to eighteen months will shape the strongest private-equity vintages of the decade. Prepare callable capital now and strengthen relationships with GPs before competition returns.

Think of this as patient capital: capital earmarked for compounding, not reaction.

Allocate 10–20 % of liquidity for phased equity commitments rather than single-point entries. The goal is to earn income from credit today while positioning for equity growth tomorrow.

5. Keep Tactical Liquidity Ready for Dislocation

Every easing phase brings volatility before stability. That turbulence is the short-term opportunity set.

Hold 10–20 % in liquid positions designed for agility—bridge loans, opportunistic secondaries, or high-quality assets mispriced during market swings.

This is responsive capital: ready to move when dislocation creates price gaps. Investors who compound best always keep part of their balance sheet ready for the unexpected.

6. Reposition the Portfolio Barbell

A successful pivot portfolio balances protection with participation.

Offense: private credit, secondaries, growth equity.
Defense: fixed-rate long-term debt, near-term liquidity, and stabilized real assets.

The balance allows compounding on both sides—income during normalization and appreciation during expansion.

The objective isn’t diversification for its own sake but duration alignment across the capital stack.

7. The Pivot Pyramid

Visualize the transition as a simple framework:

• Base: Yield (credit and income stability)

• Middle: Cash Flow (real assets and refinancing gains)

• Top: Optionality (equity re-rating and growth)

Each level funds the next as policy loosens. The structure converts early positioning into multi-year compounding without increasing risk.

Closing Thought

We’re standing in the narrow handoff between scarcity and liquidity—the point where disciplined structure compounds faster than prediction.

Investors who prepare portfolios around that rhythm build wealth through the entire easing cycle instead of chasing it after the fact.

THE WEALTH REBELLION

“Unconventional behavior is the only road to superior results, but it’s not easy—because it’s uncomfortable.” — Howard Marks

Cycles make most investors cautious when they should be bold.
They wait for proof, for consensus, for the story to feel safe.

But wealth isn’t built in the safety of headlines.
It’s built in the tension between scarcity and liquidity.

The investors who move during uncertainty don’t just survive the turn; they compound through it.

That’s the rebellion: acting from discipline and not from fear. Because, you know, it’s uncomfortable as hell.

WHAT WE ARE READING

Fed's Miran: Cutting interest rates again in December would be 'a reasonable action'

US Federal Reserve lowers policy rate 25 basis points in 2nd cut of 2025

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