As investors are reeling from the now sixth day of losses in the stock market, which is off 6% from its highs so far in that time, due to a raging trade war with China and unsatisfying Federal Reserve attempts to placate President Trump and investors, market participants are weary and seeking out alternatives to stock allocations. One allocation that is particularly appealing in these tumultuous times is Treasury Bonds, a traditional safe haven.
Like gold, investors flock to Treasurys in times of distress and uncertainty. Treasury bonds make interest payments semiannually, and the income received is only taxed at the federal level. Treasury bonds are known in the market as primarily risk-free; they are issued by the U.S. government with very little risk of default.
While Trump’s latest tariff threat on the roughly $300 billion of Chinese goods not currently targeted by American levies may force the U.S. central bank to cut interest rates more than it hoped was necessary to protect the economy from trade policy risks, leery investors are fleeing markets in droves, seeking safety in bonds and gold.
Most economic experts agree that the stock market is in a late bull market cycle, offering potential more risk than reward at this point.
“I think in this environment, right now, today, it would be foolhardy to go into risky assets,” Duncan Wrigley, chief strategist at Everbright Sun Hung Kai, told CNBC’s “Squawk Box Europe” on Monday.
“I think there is going to be a little bit more of a market adjustment, and probably an over-adjustment, in response to the trade action and the yuan,” he added.
For investors seeking more risk-off assets, one ETF that is of particular interest is the iShares 20+ Year Treasury Bond ETF (TLT). The iShares 20+ Year Treasury Bond ETF seeks to track the investment results of an index composed of U.S. Treasury bonds with remaining maturities greater than twenty years. The fund offers exposure to long-term U.S. Treasury bonds, with a low expense ratio of just 0.15%, and is up over 14% for the year.
With an average yield to maturity of 2.35%, according to iShares, TLT is a solid choice for investors looking for an alternative to gold or Bitcoin, that offers relative safety for low cost.
For more market trends, visit ETF Trends.