Is it too late to buy TLT now?

Thanks to everyone's support, the article I shared yesterday about bond ETFs before the Fed rate cut received many likes and bookmarks from friends. Today, I'd like to share another perspective: "Is it too late to invest in $iShares barclays 20+ Yr Treasury Bd(TLT.US) now?"

First, we need to understand that knowing the economic cycle and market trends can help us make better investment choices. When the rate-hiking cycle ends, bond prices usually rise, making bond ETFs a good option.

TLT tracks 20+ year U.S. Treasury bonds with an AAA risk rating and near-zero default risk. Since its inception in 2002, its returns have been multiples. From a long-term perspective, the best time to buy TLT is undoubtedly at the end of a rate-hiking cycle. Here are three patterns to help determine if the rate-hiking cycle has ended:

1. No further rate hikes within three months after the last hike: The Fed typically hikes again within three months. If it doesn’t, the cycle has likely ended.

2. Inflation rate higher than pre-hike levels: Historical data shows inflation tends to be higher at the end of a rate-hiking cycle.

3. Unemployment rate lower than pre-hike levels: Unemployment usually drops before the cycle ends.

However, we can never perfectly time the bottom. Strategically, it’s better to gradually buy TLT when the cycle ends, targeting a 30%-40% allocation. Avoid lump-sum investments—scale in to reduce risk.

This strategy answers the opening question: Is it too late to buy TLT now? Actually, no.

At the December Fed meeting, Chair Powell explicitly stated they were discussing not further hikes but the timing of cuts, confirming market expectations that the July 2023 hike was the last. Since then, TLT has bottomed and rebounded in 2024.

Chart-wise, that was TLT’s best entry point. The next best time? Now.

The U.S. is about to enter a rate-cutting cycle. BlackRock Research believes the U.S. economy is stronger than expected, and inflation is sticky, so the Fed may not cut aggressively. Market expectations for cuts might be too high. Fitch expects 0.25% cuts from September to December, totaling 125 bps next year and 75 bps the year after. Goldman Sachs thinks lower rates will support IT and AI projects.

From a market participant’s view, rate cuts are just starting. Now is a good time to invest in high-grade, long-duration bonds—even U.S. Treasuries—at slightly below par. TLT is a solid, low-effort choice.

Like any investment, set a stop-loss (8%-12%), avoid over-leveraging, and monitor market trends. Hope this helps you seize opportunities. @@momoM @复利魔方3650 @京城Z先生 @輸棟樓的韭菜 @corazon