| ANNUALIZED SINCE INCEPTION | QUARTERLY | YTD |
|---|---|---|
| -1.4% | -1.2% | 2.3% |
| 2025 |
|---|
| 2.3% |
The Wasatch-Hoisington U.S. Treasury Fund returned 2.32% in 2025 versus 7.30% for the Bloomberg US Aggregate Index, with performance impacted by a slight rise in long-term Treasury yields while shorter yields fell. The managers identify eight disinflationary forces that will persist in 2026: weakened labor markets with unemployment rising to 4.4%, slowing real disposable income growth, restrictive monetary conditions despite Fed cuts, fiscal tightening from deficit reduction, idle manufacturing capacity, global economic stagnation, tariffs acting as demand shocks rather than inflationary, and AI creating excess capacity. Real world dollar liquidity fell 8.3% in 2025 while commercial bank lending stagnated. Unit labor cost growth of just 1.2% over four quarters reinforces disinflationary pressures. The Fisher equation suggests 30-year Treasury yields should decline as inflation expectations ease, supporting the fund's positioning in long-term Treasury bonds. Consumers enter 2026 with weak financial health, requiring tax refunds for balance sheet repair rather than spending.
Eight disinflationary forces will persist in 2026, making long-term Treasury bonds attractive as inflation expectations decline and yields fall in accordance with the Fisher equation.
The outlook for long-term Treasury bond yields appears increasingly favorable as ongoing disinflationary forces point to further easing of inflation expectations in 2026.
| Date | Letter | Tickers | Keywords | Pitches | Quick Takes |
|---|---|---|---|---|---|
| Jan 22 2026 | 2025 Q4 | - | Bonds, Disinflation, Fed, inflation, liquidity, Monetary, rates, Treasury | - | Eight disinflationary forces are expected to persist in 2026, including weakened labor markets, slowing real disposable income growth, restrictive monetary conditions, and reduced federal budget deficit. Unit labor cost growth limited to 1.2% over past four quarters reinforces ongoing disinflationary pressures. Long-term Treasury bond yields appear increasingly favorable as inflation expectations ease. The Fisher equation suggests 30-year Treasury yields should decline as expected inflation falls, supporting the fund's positioning in long-term Treasury bonds. AI is viewed as disinflationary both cyclically and secularly. Like previous breakthrough technologies, AI may follow a pattern of massive capital investment before sustainable profits materialize, creating excess capacity and compressing margins. A Federal Reserve study of 150 years of tariff policy found that higher tariffs lead to lower economic activity and unemployment, putting downward pressure on prices. Tariff increases act 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 loans remained virtually unchanged despite Fed rate cuts, with banks channeling funds to high-risk areas rather than consumers and small businesses. |
| Oct 24 2025 | 2025 Q3 | - | AI, Bonds, Deflation, liquidity, tariffs | - | The fund outperformed as long-term Treasury yields declined slightly amid global disinflationary pressures. The managers argue that AIs productivity effects are deflationary, reducing demand for labor and capital, while tariffs and monetary restraint constrain liquidity. They maintain a long-duration Treasury position, expecting yields to trend lower through 2026. |
| Jul 21 2025 | 2025 Q2 | - | Deflation, duration, interest rates, macroeconomics, Treasuries | - | The fund argues that economic deterioration and tariff-related demand destruction increase the attractiveness of long-duration Treasuries. Falling growth expectations and disinflationary forces are expected to outweigh near-term inflation noise. Long-term government bonds are positioned as both defensive and opportunistic assets. |
| Mar 31 2025 | 2025 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 | |
RatesFederal Reserve resumed rate-cutting cycle with first cut since December 2024, signaling resumption of easing. Expected three cuts of 25bps between now and first quarter 2026 as Fed responds to signs of weakness in US labor market. |
Fed Monetary Policy Labor Market Easing Liquidity | |
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 |
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 |
Bonds |
||
| 2025 Q2 |
Deflation |
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