The imposition of new tariffs by President Trump has introduced a complex dynamic in the financial markets, with significant implications for both equities and bonds. While the tariffs are expected to elevate inflation by increasing import costs, they simultaneously heighten recession risks, as GDP could potentially decline by up to 2% if European tariffs are enacted. This dual threat has left markets in a state of uncertainty, with equities particularly vulnerable to downside risks due to anticipated reductions in corporate earnings and GDP growth.
In this environment, long-dated Treasury bonds, such as those tracked by the iShares 20+ Year Treasury Bond ETF (TLT), are gaining attention. These bonds are seen as a safer investment amid recession fears, as investors seek refuge from the volatility affecting equities. The ETF focuses on long-term U.S. Treasury securities, which are typically favored during periods of economic uncertainty due to their perceived safety and stability.
As of 12:32 on February 3, TLT is trading at $88.25, up from its last close of $87.45. The ETF opened at $88.57, reaching an intraday high of $89.10, reflecting investor interest in long-dated Treasuries as a hedge against the current economic uncertainties.