Why Invest in TLT? The Market Says ‘Recession Hedge’

Why invest in the iShares 20+ Year Treasury Bond ETF (TLT)?

Since I’ve covered the bond market proxy many times over the past few years and I’ve used long bond ETFs like it in personal and client portfolios, I’m asked this question frequently.

In 2023, when I started writing consistently on TLT, the answer may have been price appreciation potential. In 2025, however, the answer is as a recession hedge.

For example, in October of 2023, I was one of those who were asking the question: Is the bottom in?

I was referring to TLT’s price, which had fallen 50% from its peak, becoming the face of the massive bear market for bonds. At the time, the Fed had signaled the end of its rapid rate-hiking campaign following its fight against the worst inflation in 40 years.  

Turns out, the bottom was in, and TLT climbed 20% in price over the next two months.

Fast-forward to the first quarter of 2025, when investors grew concerned that declining consumer sentiment around the potential of a prolonged trade war might push the U.S. economy into a recession.

For the year through April 1, TLT rose 5.8% while the S&P 500 fell 4.3%.

Question answered.

The Follow Up Question: What’s Next for TLT?

The 2025 outlook for long-term bond ETFs like TLT depends on the interplay between inflationary tariffs and recession risks—two conflicting forces in the bond market.

Inflationary Tariffs Could Keep Yields Higher

If tariffs drive up costs for goods and materials, inflation could remain sticky or even reaccelerate, prompting the Federal Reserve to keep interest rates higher for longer, especially if the labor market remains resilient.  

Higher rates put pressure on long-duration bonds, as their fixed payments become less attractive relative to new bonds with higher yields, potentially leading to continued weakness in TLT.

Recession Risks Could Push Yields Lower (and Prices Higher)

If recession risks continue to rise, investors may seek the yields and price appreciation potential of long-term Treasuries, driving up demand for ETFs like TLT and pushing bond yields lower (which increases TLT’s price). The Fed could also pivot to rate cuts, which would further benefit TLT by making existing lower-yielding bonds more valuable.

No matter what happens with the U.S. economy, long-term bond ETFs like TLT are best used as diversification tools first and as yield-generators second, deserving relatively low allocations in a portfolio.

For risk-averse investors who prioritize yield over price appreciation potential, ultra-short-term Treasury ETFs may be a better alternative.