We are initiating a modest hedge by shorting $QQQ and going long $TLT. This is not an aggressive directional bet. It’s a measured step to add some downside protection to the portfolio as we head deeper into 2026.
Why We’re Doing This Now
High valuations, extreme concentration risk, and growing AI ROI skepticism in the Nasdaq-100 ($QQQ). Elevated recession and growth-scare risks continue to favor risk-off assets.Attractive setup for long-duration bonds ($TLT) as any economic softening or Fed easing should drive yields lower. Negative stock-bond correlation has returned in the current macro regime, supported by strong historical precedent in similar environments.
The Core Thesis
We remain cautious on equities for 2026. A combination of potential tech disappointment (especially around AI monetization) and macro headwinds — including oil prices, geopolitics, and labor market dynamics — increases the odds of equity weakness. At the same time, bonds stand to benefit from any flight-to-safety flows or monetary easing. This tactical long TLT / short QQQ position is designed to perform well in exactly that scenario.
Bottom line:
This hedge aligns with our overall cautious outlook. It gives us participation if the market continues to grind higher, while providing meaningful protection if growth fears materialize and capital rotates out of concentrated tech into safer, longer-duration assets.