One of the my favorite themes throughout 2014 was the money flowing into the bond market. Although U.S. Stocks were up last year, the Bond market was the major outperformer. I think this trend is here to stay and bonds will continue to outperform stocks, at least in the United States. Wall Street Economists keep telling us to sell bonds, but the market is still telling us to do the opposite. We will keep relying on the market and fading this Economist consensus that has been so wrong for so long.
Here is the chart that I think explains this story the best. This is a weekly ratio chart comparing the US Treasury Bond ETF to the S&P500 (TLT/SPY). Not only does it appear as though we have found support at the 2007 lows, but we are now attempting to break out above the downtrend line from the March 2009 top:
US Treasury Bonds more than doubled the performance of the S&P500 last year. I see no reason to think that this outperformance will not continue. Economists keep telling us that rates are going higher. I’m not sure what they are looking at, but the Fed Fund Futures, that have gotten this dead right from the beginning, continue to suggest otherwise. We’ll stick with the market….
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Tags: $TLT $TNX $SPY $SPX $ES_F $ZN_F $ZB_F