Renewed uncertainty surrounding trade tensions with China has sent global equity markets tumbling in recent weeks.
This has sent many investors scrambling, seeking the relative safety of U.S. Treasuries and other fixed income investments.
We don’t need to overcomplicate what’s happening. If money is flowing out of equities, it’s going somewhere. And a little technical know-how can help savvy investors capitalize on opportunity.
Markets are a simple function of supply vs. demand. If demand exceeds available supply, prices will rise. Conversely, if supply exceeds demand, prices will fall. Simple right?
Right now, investor demand for the safe harbor of treasuries is lifting prices of Treasuries.
Both the iShares Barclays 10-20 yr Treasury Bond ETF (TLH) and the iShares Barclays 20+ yr Treasury Bond ETF (TLT) have seen significant improvement on their respective P&F charts during 2019.
Check out these P&F charts of the iShares 10-20 year Treasury ETF (TLH) and that of TLT – the iShares 20+year Treasury ETF.
TLT looks as though it wants to break out above its 2017 high and can do so with a move above 128.00. If it does, momentum may carry it to 2016 levels.
While TLH, the iShares Barclays 10-20 yr Treasury ETF, has seen continued demand, giving its third buy signal of 2019, with a double top break at 138.00
It’s not just Treasuries benefiting from turbulent equity markets. The iShares US Core Bond ETF (AGG), often used as a core investment grade bond proxy, broke a double top in Thursday’s trading (5/23), reaching its highest level since 2017.
I’ve added a few price charts below. These are charts most investors utilize, where the P&F charts above can be a little confusing to the untrained eye.
The first price chart compares recent performance of our treasury proxies (TLT) and (TLH) to that of the S&P 500.
The S&P topped out on May 3 (black line), when volatility gripped the market – while the flight to safety has bid up prices in Treasuries.
It’s a similar picture when comparing recent performance of corporate bonds vs the S&P 500 index. Since May 3rd, equity markets have swooned while corporate bonds have continued higher.
A few names to consider if you’re looking to add capital to the fixed income space include the Vanguard Extended Duration Treasury ETF (EDV), VanEck Vectors Intermediate Muni Bond ETF (ITM) and the iShares S/T Corporate Bond ETF (IGSB).
If, like many investors, you’re concerned about how your portfolio will fare, consider booking an appointment with one of our advisors for a portfolio evaluation.
We can quickly assess the relative strength of the securities you’re holding, and suggest areas for improvement if our assessment shows your accounts are lacking strength.
As always, invest wisely.
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