TLT and XLB ETFs- good investments if the rates are going down

There are many people recommending to invest in bonds in order to take advantage of a potential rate cuts in the near future. TLS and XLB ETFs represent good alternative to the bonds investments as they are the USA and Canadians long term bonds ETFs.

The effective duration of TLT is 16.5 and for XLB is 14%. This means that if interest rates go down by 1%, then the TLT share price goes up by 16.5% and XLB by 14%.

Definitely many prefer to bet on a more aggressive approach considering that if rates are going down the stocks will go up, which theoretically speaking is true. Anyway if the rates are going down can be related to a slow down in economy or eventually a recession which , in short term will move stocks lower, and an investment in TLT and XLB can be handy.

I am not recommending buying TLT or XLB but I consider that for some people having some extra protection or being more defensive makes sense.

Just to ad that these ETFs pays ~3.5% dividends and on USA side there is UBT ETF which is a two times bull TLT ETF.

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