I’ll say one thing for Hoisington’s quarterly letters: They’re efficient.

The firm, which is synonymous in the financial media with its semi-famous chief economist, Lacy Hunt, covers a lot of ground using remarkably few words. The Q1 installment, released on Tuesday, was no exception.

In just five pages, Hoisington recapped 275 years of financial cycle literature (or related works), starting with Hume’s “Of Public Credit” and running all the way up through a 2022 BIS paper and a February 2023 piece from the San Francisco Fed.

The upshot was straightforward and on the off chance you couldn’t find 10 minutes to read “all” five pages, Hoisington didn’t bury the lede. “Excessive monetary policies initiate two processes — inflation and excessive risk taking that becomes an integral part of the financial cycle,” the firm said, just four sentences in. “Together these two processes expose the economy to financial crisis, with one monetary policy fiasco leading to a future disaster.”

As you can imagine, Hoisington is bullish on bonds, which I suppose is comforting to the extent it means the world isn’t completely upside down. A Hoisington that isn’t bullish on bonds is a McDonald’s that isn’t bullish on fries. “The risk of a recession continues to rise, even though the economy grew in the first quarter,” the firm said, adding that the Fed has now “neutralized the inflationary impact” of the unprecedented surge in money growth witnessed in 2020 and 2021.

Hoisington noted that the 12-month drop in M2 is surely the sharpest since the 1930s, and said any uptick in velocity that works at cross purposes with the Fed’s goals will almost invariably reverse. Velocity, Hoisington reminded investors, lags the business cycle “by formula and statistical estimation.”

As usual, Hoisington’s cadence was matter-of-fact to the point of being deterministic. “When velocity turns down, monetary policy will have very little capability to stimulate economic activity,” the firm said. “The well-known ‘pushing on a string’ predicament will be totally insufficient to describe the situation that lies ahead.”

And, so, inflation will recede, and long-end Treasury yields will likely decline. According to famous bond bulls, anyway.

Meanwhile, panelists in the April vintage of BofA’s Global Fund Manager survey held the largest bond Overweight since 2009, both on an absolute basis and relative to equities (see the figures below).

35% of survey participants expect the onset of Fed cuts in Q1 of 2024, while a combined 42% see easing commencing at some point in the back half of this year.

A net 84% said global inflation was heading lower, and a net 58% now expect lower short-term rates, the most since November of 2008.

Of course, when everyone’s on one side of the boat, it tends to capsize. The “pain trade [is] up in bond yields… if the consensus lust for recession isn’t immediately satisfied in Q2,” BofA’s Michael Hartnett said.