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| Quarter | Letter Date | Fund Name | QTD | YTD | Tickers | Themes | Quick Take |
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"Hoisington argues the U.S. is exiting globalization's disinflationary era and entering a structurally higher inflation regime (3.5-4.5%) driven by supply chain fragmentation, labor scarcity, and surging capital demands from industrial policy and AI infrastructure. With net national saving near historic lows and the Fed under Warsh expected to pursue balance sheet restraint, the outlook is for more volatile interest rates with upward pressure on long-term Treasury yields."
Hoisington Investment Management argues that the U.S. is exiting the disinflationary era of globalization (1990-2020) and entering a structurally higher inflation regime, with equilibrium inflation migrating from 1.5-3.5% toward 3.5-4.5%, with significant risk of episodes above 5%. The shift is driven by the reversal of forces that once suppressed inflation: supply chain fragmentation from strategic rivalry with China, tariffs, and friendshoring; labor scarcity from demographic aging and slower labor force growth; and rising capital intensity from industrial policy, AI infrastructure investment, energy-grid expansion, and defense manufacturing. The U.S. faces a capital scarcity problem, with net national saving near historic lows just as investment demands surge. AI, while potentially productivity-enhancing, is extraordinarily capital and energy-intensive, placing sustained upward pressure on utility costs. The Federal Reserve under Chairman Kevin Warsh is expected to pursue balance sheet restraint, which could initially tighten financial conditions but eventually reduce inflationary pressure if sustained. The result is a more volatile interest-rate regime, with both inflation and long-term Treasury yields trending upward absent a sustained recession, favorable supply-side shock, or prolonged monetary restraint.
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