Treasury bonds continue to be a stalwart position among income investors and those who opt for credit quality over yield or other characteristics of fixed-income. Treasuries benefit from the highest credit rating possible and are backed by the full faith of the U.S. Government. They are also the most directly susceptible to interest rate fluctuations and would perform poorly during a secular period of rising rates.
One attractive way to own Treasury bonds is through a diversified exchange-traded fund (ETF). This vehicle creates the flexibility to directly hone in on a certain maturity or index methodology in an extremely low-cost and liquid package.
In this month’s video, I look at the technical trends developing in stocks and bonds. Chart review includes analysis of large-cap, small cap, international, Treasury bonds, and gold prices. Observations of risk and reward are noted throughout with an emphasis on moving averages as a source of support or resistance. Recorded on April 11, 2017.
The nature of investing is one that we are constantly looking in the rear-view mirror to anticipate what our expectations are for the future. This often leads to considerable hopes that existing trends will extend indefinitely or that we will be able to easily spot any rough spots on the road ahead.
Bond investors have likely felt a sense of building confidence over the years as low volatility and global risk aversion have buoyed fixed-income prices. The relative consistency of capital growth, coupled with the “lower for longer” outlook of interest rates, has created a complacent atmosphere overall.
Everywhere you look now, someone has an opinion about the direction of the markets under a Trump presidency. There is speculation on everything from the impact of his trade policies to the potential of further deficit spending and legislative changes. These factors have coalesced to send many sectors of the stock and bond markets into a tizzy as investors grapple for positioning. Read more
In 2014, Tony Robbins introduced the world to the ‘All-Weather’ portfolio as constructed by renowned hedge fund manager Ray Dalio. Also known as the ‘All Season’ strategy, Dalio proposed a mix of multiple asset classes that together can survive virtually any storm.
The key components and weights of this strategy are the following:
30% in U.S. stocks
40% in Long-term U.S. Treasury Bonds
15% in Intermediate-Term U.S. Treasury Bonds
7.50% in Gold
7.50% in broad Commodity basket
The end result is a diverse group of inflationary and deflationary investments that that work to lower volatility and potentially enhance returns over the long-term.