Thoughtful Money · Oct 4, 2026 · 42m · 29m saved
With Michael Pento, President of Pento Portfolio Strategies
Michael Pento has been net long stocks since 2023. This week he neutralized his portfolio, offsetting every long position with a short, and recorded a weekend update to say so.
Most of the recent talk about bonds has been about locking in high yields before they fall. Pento is buying only Treasury bills and 1- to 3-year Treasuries, and expects any rush into long bonds during a recession to be brief.
"I'm saying there's a small chance that 2027 won't be a disaster, but it's very likely that it's going to be a disaster." — Michael Pento
Michael Pento, President of Pento Portfolio Strategies, on Thoughtful Money, personally manages a long-short portfolio and runs a rules-based model of the economy. The last time that model turned him neutral and then bearish was December 2021, ahead of a 2022 in which both stocks and bonds fell. In this interview he set out the three reasons for this change, his current positions, and what would make him buy again.
The full interview is covered here so you can skip it. 42 minutes of audio, 13 minutes of reading.
Here are the 13 calls that matter.
Key Takeaways
Pento has moved from net long to neutral: every long position is now offset by a short
He says the Fed is raising rates to deflate the AI spending boom, the one source of inflation rate hikes can reach
He credits AI investment with 50% of GDP growth and 80% of earnings growth
The bond market is breaking in a new way: high-yield spreads are widening while Treasury yields rise
40% of S&P 500 stocks are down 30% or more, which he calls a crash, even with the index near its high
He is buying only Treasury bills and 1- to 3-year Treasuries, and expects any recession rally in long bonds to fade fast
A recession could push the deficit to $6 trillion on a $40 trillion debt
Kevin Warsh will let the market fall much further than investors assume before the Fed steps in, he said
The one way out is a quick end to the Iran war that brings energy prices down within two quarters
A crash in oil and inflation expectations would be a warning, not relief
1. Why He Went Neutral
The host opened by noting that Pento had promised to come on the show whenever his model moved him into a new position. Pento said the last such call came in December 2021, when he turned neutral and then bearish. He admitted that he stayed bearish too long and was wrong in the first half of 2023, because he did not account for money draining out of the Fed's reverse repo facility.
He has been net long since 2023, and says his long-term bearishness is about the structure of the economy, not his positioning
That structure, he said, is built on debt, asset bubbles and money printing, and said he has always expected it to end badly at some point. He anticipated commenters calling him a permanent bear and answered them in advance.
"So, the last time I did this was in late 2021." — Michael Pento
"I have been net long the market since 2023, but now I am neutral." — Michael Pento
Pento said he is not net short yet, and gave three reasons for the change.
