Whether markets are full of chop or trending higher, bonds offer a versatile haven for our portfolios.
Take a look at inflation-protected securities, commonly known as TIPS.
In inflationary environments, these outperform the government bond market.
We think it’s happening now and our intermarket analysis is telling us to buy TIPS.
If you take a look at the chart of the TIP ETF against the 10-year bond ETF, you’ll see consolidation above long-term support. One thing we know about these kinds of consolidations is that they tend to follow through in the direction of the primary trend.
The trend for TIPS relative to treasuries is higher.
Historical perspectives, like those found in Jack Schwager’s classic Market Wizards, can offer essential guidance on how to navigate through inflationary periods. I think this is where things are headed.
One effective way to thrive through inflationary periods is by diversifying your portfolio with assets like TIPS (Treasury Inflation-Protected Securities), precious metals, commodity-focused stocks, and currencies from commodity-rich economies.
In other words, buy the most inflationary assets in inflationary times. This list is a good way to start.
During the last major inflationary cycle, which lasted over 40 years, inflation climbed steadily alongside rising yields.
As long as yields continue higher we expect TIPS to outperform long-term treasury bonds.
TIPS hit a 52-week high this year, a signal I regularly use to diagnose the primary trend in my trading models.
We want to own the TIP ETF on a break above 111. This is the same pattern we have been buying this entire cycle. A large base breakout.
We think long-term traders and investors should seriously consider adding TIPS to their portfolios. As I mentioned earlier when I warned subscribers about the risk to the long bond trade, TIPS offer a unique advantage to avoid risk in today's environment.
-Allstarcharts Team
Thanks for reading.
As always, be sure to download this week’s Bond Report!
In case you missed it…
JC and Strazza hosted a special live event this week, sharing their insights on finding breakout trades during earnings season.
To learn how they spot these opportunities—and how you can too—click here.
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