The S&P 500® is coming off one of the best years it’s seen in decades, the Dow Jones Industrial Average is knocking on the door of 30,000 after only 2 years in the 20,000 range and traders are unsure whether the party’s ever going to end.
While there’s no telling when the current rally might abate, a large contingent of cautious traders has started the New Year hedging some of the market’s euphoria by seeking exposure to fixed-income funds.
Direxion’s Daily 20+ Year Treasury Bull 3X Shares ETF (TMF) has experienced more than $20.5 million in net inflows in the initial weeks of 2020. Meanwhile, the broad market Direxion Daily S&P 500® Bull 3X Shares ETF (SPXL) has shed a net $45 million in that same span as traders locked in profits from the index’s stellar fourth quarter.
A Big Year for Growth (and Debt)
The fact that 2019 was a huge year for price gains in both equity and debt instruments puts bullish and bearish traders alike in an interesting position. While SPXL ended the year up more than 100%, Direxion’s two 3X fixed-income ETFs, the Direxion Daily 7-10 Year Treasury Bull 3X Shares (TYD) and TMF finished 2019 up 16.77% and 38%, respectively. What’s more, they often moved inverse to the SPXL, usually seeing some of their biggest moves as equities fell.
The price action in 2019 is in part thanks to three consecutive interest rate cuts from the Federal Reserve aimed at encouraging borrowing and staving off recessionary threats like slow global growth and the U.S- China trade war. While the cuts fueled borrowing among companies and enticed investors to maintain their exposures, they also pushed bond yields lower across the board and buoyed the price of existing bonds that come with a more attractive rate.
What’s more, the grim global outlook