Admittedly, I have grown a bit weary of discussing the same topic; as a long-time advocate for ownership in funds like iShares 7-10 Year Treasury (IEF), iShares 10-20 Year Treasury (TLH), and/or iShares 20+ Treasury (TLT), I recognize that the discussion lacks pizzazz. On the other hand, since when did profits lose their sex appeal? After all, TLT has handily outperformed the S&P 500 SPDT Trust (SPY) since the start of 2014.
This is not to suggest that I regard bonds as the only portfolio-worthy investment. As I have for the last 16 months, I continue to favor the barbell approach for my clients. The safest of safer haven assets on the left hand-side of the barbell include funds like Vanguard Long-Term Bond (BLV), iShares 10-20 Year Treasury (TLH) and Vanguard Long-Term Government (VGLT). The right hand side? It still has price momentum stand-outs like SPDR Select Health Care (XLV), mid-cap movers like Vanguard Mid-Cap Value (VOE) as well as my long-time low volatility “fave” in iShares USA Minimum Volatility (USMV).
Have there been new additions to the right-hand riskier side since 2015 began? Absolutely – and I’ve talked about many of them along the way. The country that benefits the most from the battered euro is Germany – a country that exports more of its wares to the rest of the world than any other in the euro-zone. The iShares Currency Hedged Germany ETF (HEWG) has been a go-to asset for foreign exposure. Moreover, in spite of its price volatility, PureFunds ISE Cyber Security (HACK) is a thematic gem. While it has struggled to break through its February highs, it remains as attractive as any growth prospect in an insanely overvalued world.
For those who have not necessarily been reading me for the last decade, it is important to know that I am not a “buy-n-hold” investor. I protect positions with stop-limit loss orders, trendline analysis and hedges. It follows that if another “taper tantrum” were to occur, I would lessen the long-bond exposure and revisit reallocating to treasuries down the road. Similarly, if a broad market sell-off hits equities, client portfolios would see a greater allocation to cash until the storm clouds dissipate.