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Quarter	Letter Date	Fund Name	QTD	YTD	Tickers	Themes	Quick Take

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Hoisington Investment Management 2023 Q3 Investor Letter | Buyside Digest

Back to Fund Profile (Hoisington Investment Management)

Primary Source Intelligence • Q3 2023 Letter Analysis

Hoisington Investment Management Quarterly Analysis

Buyside Digest is not affiliated with, and does not endorse, Hoisington Investment Management. This analysis is provided for institutional research purposes only and is not investment advice.

Fund Returns

Positioning StanceConstructive

GeographyUS

Digest Analysis

Quick Take

"Hoisington argues an impending recession is inevitable due to the standard monetary cycle where inflation acceleration requires monetary deceleration leading to recession."

Executive Summary

Hoisington Investment Management argues that an impending recession is inevitable based on the historical business cycle pattern where monetary accelerations cause inflation, which then requires monetary decelerations that lead to recessions. The firm notes that inflation accelerated from a 2% trend to over 9% in 2022 due to massive monetary and fiscal stimulus, and the Fed's subsequent monetary restraint is now at an advanced stage. Key indicators include the real Federal funds rate reaching its highest level since 2007, a yield curve that has been inverted for over twelve months, and unprecedented real bank credit contraction while GDP was still rising. The firm highlights that net national saving turned negative at $59 billion in Q2 2023, driven by government dissaving exceeding private and foreign sector saving combined. Global trade volume has declined 3.2% over twelve months, typically associated with recessions. The commercial banking sector has already been in recession for over a year based on credit measures. This environment of monetary and fiscal restraint is expected to continue through 2023 and possibly into 2024, creating favorable conditions for Treasury bonds as yields decline.

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Institutional Meta Strategy

Meta Strategy Gauges

Algorithmic conviction, macroeconomic posture, and risk appetite signals extracted from this quarterly letter with qualitative explanations.

Signal Matrix

Market Conviction

80%

CautiousHigh

High Conviction (80%)

High conviction based on detailed historical analysis and specific macro indicators. The firm makes declarative statements about inevitable recession with extensive supporting data including yield curve inversion, bank credit measures, and monetary policy lags. Language is confident and unhedged despite bearish outlook.

Growth Outlook

13%

BearishBullish

Bearish (13%)

Strongly bearish market outlook with explicit warnings of impending recession. The letter states recession is inevitable based on historical monetary policy cycles and describes the economy as far more susceptible to downturn than generally recognized.

Risk Appetite

38%

DefensiveAggressive

Defensive (38%)

Defensive positioning favoring Treasury bonds based on macro analysis. While not explicitly stating cash levels or hedging, the firm is positioned for lower yields and economic downturn, indicating reduced risk appetite.

Capital Deployment

0%

De-riskingDeploying

De-risking (0%)

No specific cash level changes or deployment activity discussed. The letter focuses on macro analysis and Treasury bond positioning but does not indicate active capital deployment or withdrawal, suggesting neutral activity.

Forward Guidance

25%

CautiousExpansionary

Cautious (25%)

Explicitly waiting for recession to play out with no new risk deployment mentioned. The firm expects monetary restraint to continue through 2023 and possibly 2024, with positioning focused on Treasury bonds rather than risk assets.

Language Signal

20%

BearishBullish

Bearish (20%)

Language dominated by risk warnings including impending recession, monetary restraint, credit contraction, negative saving, and economic deterioration. Bearish terms significantly outweigh any positive language in the letter.

Perceived Risk

85%

Low RiskElevated

Elevated Risk (85%)

Very high perceived risk with explicit systemic warnings about impending recession, negative net national saving, unprecedented bank credit contraction, and global trade deterioration. The firm identifies multiple specific macro threats with detailed analysis of downside scenarios.

Opportunity Density

25%

ScarceAbundant

Scarce (25%)

Limited opportunity set with focus only on Treasury bonds. The firm sees opportunities primarily in fixed income as yields decline during recession, but characterizes the broader environment as requiring extreme caution with limited attractive options.

Time Horizon

70%

Short-TermLong-Term

Decade+ (70%)

Multi-year thesis based on historical monetary policy lag analysis. The firm references five to nine quarter average policy lags and expects conditions to persist through 2023 and possibly into 2024, indicating a 2-3 year investment horizon.