TLT ETF

First, I would like to express to my colleagues, friends and followers: May the Year of the Snake guide your endeavors to great heights.

Interest rate risk remains significant for investors in 2025, especially in ETFs like the iShares 20+ Year Treasury Bond ETF, due to rising inflation. Inflation swaps indicate market concerns, with one and two-year swaps climbing to dangerously high levels, suggesting inflation is not under control. Rising oil prices pose a risk to Treasury rates, potentially leading to higher yields and lower prices for the TLT ETF.

Investors are feeling anxious about rising rates, particularly the 10-year Treasury yield. It reached 4.8% on Monday and is close to hitting 5%, which is causing concern among investors. Let's explore the reasons behind this classic financial issue.

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.