Recently, the financial markets have been navigating a landscape of uncertainty, driven by factors such as Trump’s potential tariff policies, persistent inflation concerns, and a slowing U.S. economy. This shift in sentiment has led investors to seek safer assets, pushing U.S. Treasuries up by over 2.5% in the past quarter, while U.S. stocks have declined by 5%. Notably, this is the first time since the 2020 pandemic that Treasuries have outperformed equities on a quarterly basis, underscoring their appeal as a defensive asset.
TLT’s Recent Price Increase and My Holding Strategy
TLT has seen a notable price increase recently, reinforcing my confidence in its long-term value. The 52-week price range for TLT has been $84.89 to $101.64, and in the overnight market, it is currently around $92.58. Despite this rise, I have no intention of selling at any price below $105, as I firmly believe that TLT has significant upside potential.
iShares 20+ Year Treasury Bond ETF (TLT)
My Strategic Allocation to TLT
TLT is not just another holding in my portfolio—it is my largest investment in Tiger Brokers and Webull. Additionally, I hold TMF, the 3x leveraged ETF of TLT, in both Webull (I hold TLT and TMF in Webull) and uSMART (I hold TMF in uSMART). My confidence in these Treasury bond ETFs stems from their historical performance and their tendency to rise when Treasury yields fall.
Direxion Daily 20 Year Plus Treasury Bull 3x Shares (TMF)
One of the key aspects I appreciate about TLT and TMF is their inverse correlation with the stock market (not always but usually). I have often observed that when the stock market declines, my TLT holdings usually increase in value. Recently, when U.S. equities faced a sharp downturn, my TLT portfolio saw significant gains, reaffirming my belief in its defensive nature.
Treasuries as a Hedge Against Economic Risks
I see TLT not just as an investment, but as a critical hedge against economic downturns. While many investors remain optimistic about the strength of the U.S. economy, I prefer to be proactive rather than reactive.
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High Interest Rates: Interest rates have remained elevated for an extended period, increasing the likelihood of a rate-cut cycle in the near future. Historically, when the Federal Reserve transitions from rate hikes to rate cuts, Treasury bonds rally, which would significantly benefit TLT and TMF.
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Trade War and Tariff Risks: Aggressive tariffs could negatively impact the economy by increasing costs for businesses and consumers. This might lead to slower growth and, eventually, rate cuts to support the economy, which would be bullish for TLT and TMF.
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Recession Possibility: While some argue that a recession is unlikely, economic cycles are inevitable. Should economic conditions deteriorate, investors may shift toward safer assets like Treasuries, driving up the price of TLT.
Why I Remain Patient and Confident?
Investing in Treasury ETFs requires patience, but I believe the long-term rewards outweigh short-term fluctuations. If and when the Federal Reserve pivots toward lowering interest rates, TLT and TMF will likely see strong upward momentum. Given TLT's recent price rebound, I remain confident in my investment and will only consider selling if the price exceeds $105.
Final Thoughts: Staying Ahead of the Curve
The recent performance of TLT has validated my investment thesis. As stocks struggle, my Treasury holdings continue to provide stability and upside potential. While some investors focus solely on equities, I value the downside protection that Treasury bond ETFs offer. With the likelihood of rate cuts increasing, I remain confident in my TLT and TMF positions, ready to capitalize on future market movements.
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