On the Closing Print show, seasoned traders Joel Elconin and Dennis (DDD) Dick delved into a discussion surrounding the bond market, with a spotlight cast on the TLT (iShares 20+ Year Treasury Bond ETF). With the backdrop of jittery market conditions, equities have recently been on a shaky ground while bonds experienced significant sell-offs.
The long and short of it: Dennis saw a chance to shift from cash into bonds. The stark bond sell-offs, alongside a bleak equity scene, hinted at a ripe opportunity. With TLT near its 2007-2009 lows and rates at a peak, the consensus was that TLT’s fall seemed to have halted, with a low likelihood to nosedive further.
Taking the plunge, Dennis diversified his portfolio, scooping up TLT along with some Canadian traded bond ETFs. This move was underpinned by a pursuit for better yields than what cash holdings could offer. The duo expressed shared concerns regarding the ripple effects of higher rates on the economic landscape. They cast doubts on the Federal Reserve’s capacity to stay the course on tightening, hypothesizing that rates may have hit a ceiling, or are at least near its ceiling. This conjecture, if it holds water, could signify a low in bond yields.
Drawing a comparative line to the strategies that saw them through the financial turbulence of 2007-2009, the discussion floated the idea of seizing bonds (NASDAQ: TLT) at a heavy markdown in the $87-88 area with relatively low risk. In the same breath, they explored the prospect of anchoring their portfolios with some dividend-payment stocks that are currently discounted, thus offering a higher yield. This approach edges out the risk-laden chase for overvalued stocks as we sail towards the earnings season.
Looking ahead, Joel and DDD emphasized the need for a solid market base before any significant rally. A cautious stance was championed, given the upcoming wave of economic data and Q3 earnings season. This outlook supports the preference for safer bonds over risky equities, at least in the near-term.
As traders and investors paddle through these choppy market waters, the insights from seasoned market navigators like Joel and Dennis could serve as a compass. Though the opportunity of buying TLT can be considered “bottom fishing,” the discourse sheds light on the potential safe havens amidst prevailing market storms.