Is it Time to Buy Bonds Yet?

(3/22/22) Maybe not yet, but we're probably getting close: The Fed this week has said it'll need to raise rates faster than previously thought because of rampant inflation. We might get a 50-basis point hike in May because of persistent inflation they didn't see coming (they also didn't see a war between Russia and Ukraine.) Expectations of higher inflation has been pushing bond yields lower. As the Fed raises rates, economic growth slows, and as that occurs, money flows out of riskier investments (stocks) and into safer plays (bonds) because of capital preservation over time. TLT pricing is more than two standard deviations below the 50-DMA. This phenomenon doesn't occur very often, or last for long, and we're currently not quite there, yet. Despite a selloff in TLT, there is a pick up in money flows into bond, and over sold conditions are setting up for a pretty decent reflexive action. From a trading perspective, this is a set up for a short term trade in bonds. Buy today, and be prepared to sell on any rally. Longer term, we're looking for rates to fall towards zero as a recession sets in later this year or early in 2023.
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