No. of Recommendations: 10
The reason I like treasuries is that they go up in value during stock market meltdowns
There is a possibility that in the next stock market meltdown, treasuries may go down in value not up.
The meltdown will presumably be because of a recession or an exogenous event. The stimulus/bailout spending the government will engage in will be so egregious as a percentage of GDP, that long term interest rates may go up fearing inflation.
Even with no recession, deficit spending during the last few years has been hovering around 6% of GDP. During Covid it was 15%. In the next crisis, how high will it go? 20%? The supply of treasuries to fund all this spending will be so overwhelming that interest rates may not go down and may even go up even in the middle of a crisis.
The federal debt and interest expense is now so precariously high, that the dynamics of how everything behaves in a crisis may change in the future.
