In early December, I posted these two charts and laid out the bull and bear case for U.S. bonds:Bond Bull Case

Bond Bear Case

Bonds bulls saw the bounce in yields over the second half of 2019 as a mean reversion. They expected rates to fail at their most recent breakdown level, and did not want to see rates get above 2%. The key level for bears was the area near 1.5%, where yields have found support over the last decade.

Since that post, bulls have had the upper hand. U.S. 10-year yields have fallen below 1.5%, challenging the lows set in 2016.

TNX

Similarly, yields on 5 and 30-year Treasury bonds set new lows on Friday. For 5s, it’s the lowest since the 2016 election. For 30s, it was the lowest since, well, ever.

FVX

TYX

Bonds aren’t the only safety trade that’s worked despite a rapidly appreciating stock market. Gold prices have rallied in recent months, climbing almost 15% since the end of November to their highest level since 2013. In fact, Gold has outperformed U.S. equities over the last year.

Gold

And within equities, defensive sectors have led the charge in 2020. Among the top 3 performers so far this year, Utilities and Real Estate rank first and third, respectively. Both managed to set new highs last week.

Utilities

Real Estate

With stocks, bonds, and precious metals all up since December 31st, it’s been a good start to the decade. Just don’t expect the good times to last – they can’t all go up forever.

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