Today I'm going to provide a quick update on bond prices, focusing specifically on TLT, the 20 year treasury ETF. You can see above that TLT recently broke out of a very well-defined cup-with-handle setup on very nice volume. The last couple weeks have been a bit "gappy" with all of the Brexit uncertainty so I wouldn't be surprised to see it retrace back to the breakout point before moving higher again. Regardless, the trend is your friend, and right now the trend is unquestionably higher.
With price roaring higher these past few weeks, it's starting to bump up against its long-term line of resistance. As such I would expect a little pullback - or at least sideways action - sometime in the near future. By no means, however, do I expect a serious correction, much less a bear market, any time soon. As for the reason why, I direct you to the next chart.
So what does this mean? It means that investors are buying bonds more aggressively than equities, which begs the question: "Why?" Well for starters, there is over $8 Trillion in negative-yielding sovereign debt floating around out there so the fact that U.S. Treasuries offer a positive yield makes them a no-brainer relatively speaking. Second, as Brexit has demonstrated, world financial markets are in a very precarious situation. Or as John Hussman put it, Brexit and the Bubble in Search of a Pin. Markets dislike uncertainty, so when there's literally nothing but uncertainty hanging around (US elections, negative rates, Brexit, etc), money is going to flee risk assets (most stocks) and flood into safe havens like defensive stocks, gold, and yes, Treasuries. In essence, you're seeing the double-whammy effect of yield-seeking investors and risk-fleeing investors all pouring money into the same asset class: US Treasuries. The effect, obviously, is higher prices and lower yields. That, in a nutshell, is why I believe bond prices will continue marching higher for at least the rest of 2016 and potentially many years thereafter.