TLT ETF

Investors could see a “right-now” trading opportunity take shape in long-term Treasury bonds.

Treasury bonds and bond yields (interest rates) have been a major investor focus of late. This is especially true as the Federal Reserve navigates interest rates and the presidential election takes center stage.

Interest rates may have less impact on inflation than is commonly believed; for economic insights, the focus should be on bank credit and lending data. Recession indicators include rising unemployment, softening manufacturing hours, and downward payroll revisions, despite strong GDP growth due to high government deficit spending. The outlook for the bond market in the short to medium term is positive due to a possible recession and what we deem to be restrictive interest rates.

Are long-dated treasury bonds and interest rates the current political football? Sure seems that way considering all the Federal Reserve talk and comments by Trump on rates and Jerome Powell.

The Fed's 50 bps cut was sugar-coated with positive rhetoric on the economy and the subsequent Jobs Report conveniently supported their point. The labour market data beneath the headlines is not as positive. TLT has unwound the entire "growth scare rally" even though the situation is worse than it was when it last traded below $94.

The peak of the interest rate cycle and declining rates make it an ideal time to invest in long-duration bonds like iShares 20+ Year Treasury Bond ETF. TLT offers high price sensitivity, return asymmetry, and portfolio diversification with low volatility and no credit risk, making it a safe haven investment. Historical and technical analysis support TLT's potential for price appreciation as rates fall, with current price levels presenting a value-buy opportunity.

TLT experienced a 6% pullback, approaching oversold levels, driven by stronger job data that priced in a "soft landing" scenario and created a 'Goldilocks' environment for equities. Investors should remain cautious as consumer credit continues to worsen, given that positive economic data can fluctuate, and historical recessions often follow exuberant stock markets. The FY2025 S&P 500 earnings consensus remains lofty, indicating 15% YoY growth and an acceleration from 11% YoY in FY2024, despite the current stage of economic slowdown.

I'd say “if the Economic Modern Family could speak

Instead of falling after the Fed lowered rates, the 10-year and 20+ year yields have risen.  This seems incongruous given the dovish Fed talk.