| ANNUALIZED SINCE INCEPTION | QUARTERLY | YTD |
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Hoisington Investment Management argues that widespread inflation concerns in 2025 were unwarranted, as eight powerful disinflationary forces emerged and will persist into 2026. These include broad labor market weakening with unemployment rising to 4.4%, sharp deceleration in real disposable income growth, restrictive monetary conditions despite Fed rate cuts, unexpected fiscal tightening through deficit reduction, and idle manufacturing capacity. The firm highlights that real world dollar liquidity fell 8.3% for the fourth consecutive year, while commercial bank lending remained flat despite rate cuts. AI technology is viewed as disinflationary, following historical patterns of massive capital investment preceding sustainable profits. Research on 150 years of tariff policy suggests tariffs ultimately suppress demand and contribute to disinflation rather than inflation. China's excess capacity continues pressuring global prices. The authors conclude that ongoing disinflationary forces, combined with limited unit labor cost growth of just 1.2%, point to further easing of inflation expectations and declining long-term Treasury yields in 2026.
Eight disinflationary forces that emerged in 2025 will persist into 2026, making widespread inflation concerns unwarranted and supporting a decline in long-term Treasury bond yields.
The authors expect disinflation to persist in 2026 driven by eight key forces including weakening labor markets, restrictive monetary conditions, and AI-driven deflationary pressures. They anticipate long-term Treasury yields will decline as inflation expectations ease further.
| Date | Letter | Tickers | Keywords | Pitches | Quick Takes |
|---|---|---|---|---|---|
| Jan 18 2026 | 2025 Q4 | - | AI, China, inflation, Labor, liquidity, Recession, tariffs, Treasury | - | Eight disinflationary forces persisted throughout 2025, including weakening labor markets, slowing real disposable income growth, restrictive monetary conditions, and tighter fiscal policy. The authors argue these forces will continue driving disinflation in 2026, contrary to widespread inflation concerns. AI is viewed as disinflationary both cyclically and secularly. The authors draw parallels to historical technology booms like steamships, railroads, and dot-com, noting massive capital investment typically precedes sustainable profits, creating excess capacity and deflationary pressures. Tariff revenues contributed 62% of the federal budget deficit reduction in 2025. Research cited shows tariffs initially boost inflation but longer-term effects suppress demand and contribute to disinflation, acting like aggregate demand shocks rather than cost-push inflation. Real world dollar liquidity fell 8.3% in 2025, marking a fourth consecutive year of decline. Commercial bank lending remained virtually unchanged despite Fed rate cuts, with banks channeling funds to high-risk areas rather than consumers and small businesses. |
| Oct 9 2025 | 2025 Q3 | - | AI, Bonds, Capacity Utilization, Deflation, tariffs | - | The commentary argues that declining global capacity utilization, AI-driven efficiency, and restrictive monetary policy will slow growth and depress inflation. Tariffs amplify liquidity contraction and reinforce disinflationary trends. The managers maintain a long-duration Treasury strategy amid excess capacity and weak credit growth. |
| Jul 24 2025 | 2025 Q2 | - | Deflation, economic contraction, tariffs, Treasuries, yield curve | - | The commentary argues that tariffs are structurally contractionary, leading to demand destruction, declining trade, and lower global growth. Management emphasizes second- and third-round effects that pressure revenues, capital flows, and employment. Long-duration Treasuries are positioned as attractive amid slowing growth and deflationary forces. |
| Apr 18 2024 | 2025 Q1 | - | - | - | |
| Jan 23 2025 | 2024 Q4 | - | - | - | |
| Sep 30 2024 | 2024 Q3 | - | - | - | |
| Jul 25 2024 | 2024 Q2 | - | - | - | |
| Apr 27 2024 | 2024 Q1 | - | - | - | |
| Jan 17 2024 | 2023 Q4 | - | - | - | |
| Oct 25 2023 | 2023 Q3 | - | - | - | |
| Jul 21 2023 | 2023 Q2 | - | - | - | |
| Apr 19 2023 | 2023 Q1 | - | - | - | |
| Jan 20 2023 | 2022 Q4 | - | - | - | |
| Oct 26 2022 | 2022 Q3 | - | - | - | |
| Jun 30 2022 | 2022 Q2 | ODL | - | - | |
| Mar 31 2022 | 2022 Q1 | - | - | - |
| QUARTER | THEMES | TAGS |
|---|---|---|
| 2025 Q4 |
AIAI has been integrated into RGA's research process through tools like NotebookLM, Gems in Gemini, and Claude Code. The firm views AI as a force multiplier for human judgment rather than a replacement, emphasizing the Kasparov Law principle. They believe the market narrative around AI displacement is swinging to unhelpful extremes, creating investment opportunities. |
Machine Learning Automation Software Productivity Innovation |
InflationInflation has continued to be a persistent feature in Japan and has prompted changes in both corporate and consumer behavior. Importantly, inflation has fed through to corporate earnings and equity performance. Companies that have successfully passed on higher costs to consumers have benefited from improved operating margins. |
Inflation Corporate Earnings Operating Margins Consumer Behavior Cost Pass-through | |
LiquidityManager extensively discusses liquidity challenges in African frontier markets, explaining how tight ownership structures and limited foreign participation restrict trading volumes. Notes that liquidity varies cyclically and structurally, with potential improvement expected as bull market develops and more investor categories participate. |
Trading Volumes Participation Structural Cyclical | |
Trade PolicyRecent tariff policies continued to negatively impact U.S. consumers and companies throughout the year. However, international companies have been finding new trade arrangements and growth opportunities, benefiting from shifts in global trade patterns as the new U.S. administration alters terms of international cooperation. |
Tariffs International Growth Cooperation Impact | |
| 2025 Q3 |
Capacity |
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Deflation |
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Tariffs |
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| 2025 Q2 |
Tariffs |
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