The 10-year U.S. Treasury note just reached its lowest yield in almost 20 months (1.837%). Yields have dropped about 20% in just three weeks… and the 10-year is approaching its all-time low of 1.404% (July 2012).
The financial universe is afraid.
U.S. 10-Year Treasury Yields Are Plunging
The U.S. 10-year note is still known as the global benchmark for “risk-free return.” That’s because global investors have long considered a U.S. debt default an impossibility. And even though America’s fiscal and monetary policies are a disaster… trust in the U.S. is still higher than the rest of the world at present.
Japan is in a recession… its debt-to-gross domestic product ratio (GDP) is the highest in the industrial world (over 227%). The European Central Bank (ECB) is planning to print almost $600 billion in new euros in stimulus. Fears abound of China’s overstimulated economy crashing into a “hard landing.” Oil’s rout continues… it’s down about 50% from last year’s highs and falling.
Everyone is afraid… and that’s why the world is scrambling for perceived safety in U.S. Treasuries. In a globe overrun by crushing debt, the U.S. 10-year note has become “the cleanest dirty shirt in the closet.”
If you’re afraid right now, the last thing you want to do is join the herd and pile into U.S. debt. As we mentioned in yesterday’s Daily, the best way to safeguard your wealth is through appropriate asset allocation. If you’ve not done so already, please read our 2015 Asset Allocation Guide right here, right now.
And remember, asset allocation is only one leg of the Palm Beach “Three-Legged Stool of Safety.” It works in conjunction with appropriate position sizing and stop losses. Following the protocol guarantees you’ll preserve your capital in any market environment.
Use these tools to cap your risk (and ease your fears). Then take advantage of the volatility. We’ll show you how some Palm Beach subscribers are doing this in a powerful way, in our next item…