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"Well, TLT is down 35.43% year-to-date, SPY is down 21.65% year-to-date, GLD is down 8.42% year-to-date, and UUP is up 16.75% year-to-date."
The simplest point is that avoiding TLT during quantitative-tightening is not market timing but recognition of fundamentals. Interest rate increases are not the primary threat to long-term Treasuries.
Or I could have been suggesting flaws in the portfolio positioning. In fact the subject post questions the portfolio.
Oh, there's a PP mutual fund. It balances gold, silver, and Swiss Franc with "dollar assets". But the dollar assets include a 26.89% positioning in corporate bonds and a 3.49% positioning in Treasury securities. The fund is down 12.97% year-to-date when without loads.
Not every stock is down year-to-date. I have a fairly well diversified portfolio and I don't jump in and out of different sectors. I keep track of month end prices FWIW, but don't pay much attention beyond that.
While updating this past month end, I noticed that Cardinal Health (CAH) had risen a bit in 2022, so there is one stock, in the health care industry, that has outperformed the general market. So what? Maybe it under performed in 2021, and maybe it will under perform in 2023.
Jan 3 2022: $54.24
Today: $73.03
Up 34,6% year to date
What really matters is what the price will be when I sell in 20+ years.
"Well, TLT is down 35.43% year-to-date, SPY is down 21.65% year-to-date, GLD is down 8.42% year-to-date, and UUP is up 16.75% year-to-date."
The simplest point is that avoiding TLT during quantitative-tightening is not market timing but recognition of fundamentals. Interest rate increases are not the primary threat to long-term Treasuries.
Or I could have been suggesting flaws in the portfolio positioning. In fact the subject post questions the portfolio.
Oh, there's a PP mutual fund. It balances gold, silver, and Swiss Franc with "dollar assets". But the dollar assets include a 26.89% positioning in corporate bonds and a 3.49% positioning in Treasury securities. The fund is down 12.97% year-to-date when without loads.
Historically for decades every time the fed has raised interest rates , more than 1% in a year bonds went up in value not down that year . Only one exception was 1994.
So unless one has a crystal ball no one knows until after the fact how things will play out .
Also the fed raising rates has a lag on the economy and the fed has no idea when the increases will hit the tipping point .
The economy can spiral down at any point .
Tlt reacts way before things are confirmed ….so things can change very quickly with huge swings in Tlt because of fear of rates now falling and short covering .
So a good portfolio always holds asset classes that look like they are doomed ..just like stocks looked in 2008 ..could we not have said why hold stocks that year ? After all why own stocks in a plunging market .
If it were as simple as some assets go down when the fed raises rates and go up when the cut them then the charts wouldn’t show what they do .
The whole idea of a good portfolio construction is that you don’t have to guess and it just rides the cycles good or bad .
The left is how much the fed raised in a year , the right is total return on bonds
Last edited by mathjak107; 10-21-2022 at 06:34 PM..
What is primary threat to TLT then if not interest rate increases? Credit risk? Why is TLT down?
The current primary threat to long-term Treasuries is quantitative-tightening which represents the FRB reducing the holding of its own issued Treasury securities. The situation is also called a reduction in the size of the FRB balance sheet.
Rising interest rates, as increases in overnight bank rates by the FRB, are not the primary threat to long-term Treasuries because rising interest rates have more of a single purpose of reducing inflation.
Now ticker TLT is a fund of long-term Treasury bonds
.
The current primary risk to long-term Treasuries is quantitative-tightening which represents the FRB reducing the holding of its own securities. The situation is also called a reduction in the size of the FRB balance sheet.
Rising interest rates are not the primary risk to long-term Treasuries because rising interest rates have the purpose of reducing inflation.
Now ticker TLT is a fund of long-term Treasury bonds
.
Isn't QT reducing the Fed's holding of Treasury securities?
FLR is up 13.84% year-to-date
LLY is up 25.41% year-to-date
MPC is up 69.63% year-to-date
The index funds are down
.
Which means we are in a stock pickers market, as opposed to trusting index funds. And since rotation keeps occurring, diversification over different sectors using best-of-breed stocks is a good strategy.
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