TLT ETF

The outlook for the iShares 20+ Year Treasury Bond ETF in 2025 hinges on a strong US economy and tariffs. Labour market data is currently in a good balance, but a relatively small rise in unemployment could trigger another growth scare. Uncertainty over tariffs and inflation are weighing on TLT, but they may not be as negative as feared.

US stock futures are showing activity in pre-market trading, raising hopes that major indexes can end their recent losses as the new year approaches. The S&P 500 is still up over 20% for the year and could achieve its largest two-year gains in almost 40 years. Additionally, bond yields increased in 2024, especially after the Federal Reserve indicated it might only lower interest rates twice in 2025.

The iShares 20+ Year Treasury Bond ETF (TLT) continued retreating this week, falling from the year-to-date high of $100.2 to the current $87.82. It has plunged to its lowest level since May 31st and formed a death cross pattern.

The stock market, or all financial markets, has changed significantly over the past couple of decades. The main way they have changed is that the concept of individualism is gone, where assets behave separately and individually from each other.

Owning long bonds like the iShares 20+ Year Treasury Bond ETF can provide portfolio stability amidst high U.S. market valuations and potential economic uncertainties in 2025. Lower-than-expected inflation driven by declining shelter and energy costs could spur Fed rate cuts, benefiting bond prices. Rising unemployment increases the risk of a recession in 2025, making bonds a potentially safer investment compared to stocks.

When investors look at the big players on Wall Street, the hedge funds and the investment banks, they aren't the so-called winners just because they have information sources that most retail traders would have to network for years to get. They are winners because they can use information through strategies that increase their odds ever so slightly over the long run.

It's been a wild ride for long-term Treasury ETFs lately, and it's looking like they might have hit a rough patch. Following months of declining interest rates, yields on U.S. Treasurys reversed course in October, and the charts are now flashing a warning: the dreaded Death Cross is looming.

November was a strong month for SPY, gaining nearly 6% and closing above its 10-month EMA, signaling a bullish trend. TLT showed mixed signals, oscillating around its 10-month EMA, but recent higher highs and lows suggest a potential bullish trend. The TLT:SPY relative strength ratio indicates that SPY has consistently outperformed TLT since July 2020, reinforcing a preference for equities.

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