TLT no longer a safe haven?

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TLT no longer a safe haven?

posted Nov 14, 2016

With the pending rate hike coming from the FMOC is TLT no longer safe?

I know there are multiple algorithms out there that go to TLT as a safe haven when the markets turn over. With the pending interest rate hike coming are those backtests going to end up worthless?

I have an algo that backtests to 2002 and goes to TLT in times of turmoil and I never saw any huge drawdown and would assume that from 2002 to now there have been hikes and de-escalation.

Any thoughts on this moving forward?

4 responses

I have been burned by the above. Many algos treat TLT as safe and often it moves it the opposite direction from SPY.

Lately I have noticed TLT, SPY and GLD all going down. Any suggestions for a long asset that goes up in this situation.

Thanks

How about AGG? It looks to be a better option than TLT for the time being.
http://www.etf.com/AGG
http://www.etf.com/TLT

You could try going to something like 25% SH (short SPY) and 75% TLT, but that only works if your algo has good timing. You can also try something less volitile like TIP. Keep in mind that bonds are not meant to move inversely to equities, they merely represent a safer alternative. in 2007-2008 bonds fell with stocks, it wasn't until people really panicked at the end of 2008 that bonds rose.

Anthony FJ Garner

Going back to 1870 in the US and the early 1700's in the UK, to my surprise I found that in the long term the CAGR was round about the same in the long term wherever you are in the yield curve. In the short term there will presumably continue to be differences as the yield curve snakes around.

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The material on this website is provided for informational purposes only and does not constitute an offer to sell, a solicitation to buy, or a recommendation or endorsement for any security or strategy, nor does it constitute an offer to provide investment advisory services by Quantopian.

In addition, the material offers no opinion with respect to the suitability of any security or specific investment. No information contained herein should be regarded as a suggestion to engage in or refrain from any investment-related course of action as none of Quantopian nor any of its affiliates is undertaking to provide investment advice, act as an adviser to any plan or entity subject to the Employee Retirement Income Security Act of 1974, as amended, individual retirement account or individual retirement annuity, or give advice in a fiduciary capacity with respect to the materials presented herein. If you are an individual retirement or other investor, contact your financial advisor or other fiduciary unrelated to Quantopian about whether any given investment idea, strategy, product or service described herein may be appropriate for your circumstances. All investments involve risk, including loss of principal. Quantopian makes no guarantees as to the accuracy or completeness of the views expressed in the website. The views are subject to change, and may have become unreliable for various reasons, including changes in market conditions or economic circumstances.