Originally Published at DailyWealth
Stocks around the globe took a hit last month…
We saw pullbacks in just about every major market… including the U.S., China, and many emerging markets.
The U.S. has already recovered well in June. But a lot of folks are still worried about what happens next.
If that sounds like you, then today I’ll share something you might be interested in. It’s an asset class that held strong in May.
In fact, at the start of this month, it broke out to its highest level since October 2016. And history says the gains should continue. So if you’re worried about stocks, this is one place to put money to work right now.
Let me explain…
Before we go any further, I want to be clear. I’m not advocating that you sell all your stocks today.
The final stage of the Melt Up my colleague Steve Sjuggerud has been writing about will likely kick in again soon. I expect last month was only a pause on the way to new highs.
Still, if the recent volatility has you unsettled, there’s nothing wrong with moving a little cash to higher ground.
The best option for that cash now is in long-term U.S. Treasury bonds. Before you hit the snooze button, hear me out…
Long-term Treasury bonds were one of the only things to jump last month when global stocks fell. You can see it by looking at the iShares 20+ Year Treasury Bond Fund (TLT). This fund holds long-dated U.S. Treasury bonds with maturity dates of 20-plus years.
TLT has been a winner so far this year. It’s up 9% in 2019… And the recent rally drove U.S. bond prices to a multiyear high.
The reason is simple – stock investors hit the panic button in May and shifted into bonds, driving prices higher. The uptrend in bonds has been strong while equities were weak. You can see it in the chart below…
The breakout was impressive. TLT hit multiyear highs earlier this month, and it’s in a strong uptrend this year.
This is a good thing for bond investors in the short run. Since 2002, similar cases of new 52-week highs led to solid outperformance in TLT over the next three months. Take a look…
Look, I hear you…
These returns aren’t as sexy as what you can get from buying stocks. But this is strong outperformance in a relatively boring asset. And there’s a simple way to juice these returns right now…
You can own these same bonds with three times leverage through the Direxion Daily 20+ Year Treasury Bull 3X Shares Fund (TMF). This fund does exactly what you’d expect… It takes the daily return of TLT and triples it.
That leverage means that if bonds continue to rally – like history predicts – we could see solid returns. A quick 8%-10% gain over the next three months is completely possible through shares of TMF.
Leverage can cut both ways, of course. So make sure you’re comfortable with that before putting money to work. But history says now is a good time to take this extra risk.
The bigger point is that when investors flee stocks, they have to go somewhere. And lately, that “somewhere” has been long-term U.S. Treasury bonds.
They just hit multiyear highs… And history says more gains are on the way. So if you’re worried about stocks, this is a smart place to park part of your portfolio for the next few months.
“You must allocate part of your capital base to measures that will help protect the whole in the event of a sharp market downturn,” Austin Root writes. He doesn’t expect a major correction right around the corner… but urges investors to consider their risk exposure. Learn more here.
“The real question is… when is it time to prepare for the big drop?” Dr. David Eifrig asks. Get the details on an indicator he’s following that shows the big-picture health of the market right here.