The iShares 20+ Year Treasury Bond ETF ($TLT) might be a surprising contender to outperform the broader market in 2025. Despite a rocky few years, with $TLT down 48% over the past five years, several factors suggest a potential rebound that could outpace the S&P 500.
First, recent economic indicators point to a possible recession later this year. Lower-than-expected CPI data released on April 10, 2025, has fueled speculation of an economic slowdown. Historically, long-term Treasury bonds like those in $TLT perform well during recessions as investors seek safety, driving up bond prices. With $TLT’s effective duration around 16.5 years, a 1% drop in interest rates could lead to a 16.5% price increase, offering stock-like returns in a falling rate environment.
Second, $TLT’s current yield of over 4.5%, makes it attractive compared to the S&P 500’s average dividend yield, which typically hovers around 1.5-2%. This yield, combined with potential price appreciation, positions $TLT for strong total returns if market conditions shift as expected.
Meanwhile, the S&P 500 faces headwinds from Trump’s tariffs, which have sparked recession fears and market volatility .
While risks like persistent inflation or unexpected rate hikes remain, $TLT’s current setup suggests it could be a smart play to beat the market in 2025. Investors looking for a hedge against equity downturns might find $TLT a compelling addition to their portfolio.