In the early 1980s, Lacy Hunt predicted a massive bond rally amid rising inflation scares. He aggressively bought long-duration government debt through his Texas firm—Hoisington Investment Management Company. For 44 years, this investor held aces in the long-bond game. He just folded. The famous economist liquidated all his treasury positions over the last few months.
Government deficits are currently stressing financial structures. An artificial intelligence spending boom constantly drains market liquidity, limiting available capital. And military escalations in the Middle East—specifically a U.S. military strike in Iran during late February—permanently altered inflation expectations. Hunt and his partner Van Hoisington realize the math no longer works for the assets they spent four decades advocating for.
For 44 Years, This Investor Held Aces in the Long-Bond Game. He Just Folded.
The capitulation happened fast. As recently as January 2026, Hoisington held a bullish stance. Their shareholder letter predicted disinflation would persist throughout the year, projecting lower long-term yields. But the economic data refused to cooperate.
Between September 2025 and March 2026, Hoisington slashed its portfolio duration from 20.88 years down to under five years. The firm pushed that duration under one year by late June. They essentially moved their entire portfolio into cash reserves. For comparison, the Bloomberg US Aggregate Bond Index currently sits at roughly six years of duration.
Financial pain drove the maneuver. Over the past five years, the fund suffered an annualized loss of 8.7%. Total assets under management collapsed from a $5 billion peak in 2020 to under $2 billion today. Specifically, the traditional 60/40 portfolio model relied heavily on Hunt’s intellectual framework—a framework that crashed by nearly 20% in 2022. They don’t expect a quick fix.
A specific detail caught the attention of Charlie Garcia at MarketWatch. In June 2026, inflation data showed prices dropping to 3.5% from 4.2%. The shift marked the first monthly drop in prices in six years. Historically, Hoisington bought bonds during economic downturns, and they expect a U.S. recession soon. They still sold their bonds anyway. The strategists argue that investors simply demand a higher risk premium to hold American debt.
Industry peers noticed the retreat right away. DoubleLine Capital executive Jeffrey Gundlach publicly validated the shift on the social media platform X. “Even Lacy Hunt has turned bearish, to his credit,” Gundlach wrote.
Deficit Spending and AI Demand Rewire Global Debt
Honestly, the disinflationary era fueled by globalization is officially dead. Hunt and Hoisington predict the long-run equilibrium range for inflation will migrate from a historical average up to a 3.5% floor. They see significant risks of future inflation spikes exceeding 5%.
Two structural forces guarantee higher yields. Federal deficits require a constant flood of new bond inventory to keep the government funded. Meanwhile, corporate America’s aggressive spending on AI infrastructure creates intense competition for available capital.
Global events actively accelerated the timeline. A U.S. military strike in Iran during late February triggered immediate oil spikes, and markets instantly flipped their expectations from interest rate cuts to rate hikes. By May 2026, the 30-year Treasury yield surged to nearly 5.2%. The surge marks the highest point achieved since 2007. The yield recently traded around 5.12%.
Things changed fast. Hunt finally walked away from the table. Right now, it’s a harsh environment to find yourself trapped in.