Long Bonds vs S&P 500
TLT (iShares 20+ Year Treasury Bond ETF) and SPY (SPDR S&P 500 ETF) are the standard stocks-vs-bonds pair at the heart of the classic 60/40 portfolio. As of April 24, 2026, SPY trades near $708 and TLT near $86.55, far below TLT's ~$170 peak in March 2020.
Also known as: 20Y+ Treasury ETF (long bonds, treasury ETF) · S&P 500 ETF (SPY) (ETF_SPY, S&P 500, SPX, SP500)
Why This Comparison Matters
TLT (iShares 20+ Year Treasury Bond ETF) and SPY (SPDR S&P 500 ETF) are the standard stocks-vs-bonds pair at the heart of the classic 60/40 portfolio. As of April 24, 2026, SPY trades near $708 and TLT near $86.55, far below TLT's ~$170 peak in March 2020. The relationship inverted dramatically in 2022 when both fell together (TLT down 33%, SPY down 18%), producing the worst 60/40 year since 1937. The post-2024 regime has partially restored the hedging relationship, though correlation remains regime-dependent.
What TLT and SPY Actually Hold
TLT is the iShares 20+ Year Treasury Bond ETF. It tracks the ICE U.S. Treasury 20+ Year Bond Index, holding a portfolio of US Treasury securities with remaining maturities of at least 20 years. As of early 2026 it manages approximately $41.8 billion and carries a duration of roughly 17 to 18 years, making it the most rate-sensitive mainstream Treasury ETF. Expense ratio is 0.15 percent.
SPY is the SPDR S&P 500 ETF Trust, tracking the S&P 500 index of 500 large-cap US stocks. Expense ratio 0.0945 percent. Both ETFs are highly liquid, with SPY averaging hundreds of billions in daily notional volume and TLT averaging over a billion dollars daily. They are the textbook vehicles for expressing stock-bond allocation views in a single line item each.
The Classic 60/40 Allocation Framework
For over five decades, the 60/40 portfolio (60 percent equities, 40 percent long-duration bonds) has been the default balanced allocation for individual investors and target-date funds. The framework rests on the observation that stocks and long bonds historically have low or negative correlation, so the bond allocation dampens equity drawdowns without sacrificing too much long-run return.
Against the SPY/TLT benchmark, a 60/40 portfolio from 1976 to 2021 delivered roughly 9 percent annualized returns with drawdowns substantially shallower than 100 percent equities. The worst single-year return through 2021 was approximately negative 20 percent (2008). That historical track record is what made 60/40 the default, and what made 2022 such a shock to the framework's reputation.
The Historical Inverse Correlation
From the mid-1990s through 2021, TLT and SPY had a reliably negative correlation on monthly timescales, typically in the range of negative 0.2 to negative 0.5. The mechanism was monetary policy: in growth scares, the Fed would cut rates, boosting bonds and hurting stocks initially before the rate cuts supported equities. In inflation scares, the Fed would hike rates, hurting bonds but not usually enough to overwhelm equity growth.
Conditional Forward Response (Tail Events)
How S&P 500 ETF (SPY) has historically behaved in the 5 sessions following a top-decile or bottom-decile daily move in 20Y+ Treasury ETF. Computed from 1,285 aligned daily observations ending .
Following these triggers, S&P 500 ETF (SPY) rises 0.48% on average over the next 5 sessions, versus an unconditional baseline of +0.22%. 128 qualifying events; S&P 500 ETF (SPY) closed positive in 63% of them.
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Frequently Asked Questions
Does TLT hedge SPY during stock market crashes?+
Sometimes. In crashes driven by growth fears or financial stress (2008, March 2020 COVID), TLT rallies strongly as the Fed cuts rates and investors seek Treasury safety, providing a meaningful hedge. In crashes driven by inflation and aggressive Fed tightening (2022), TLT falls alongside SPY because rising rates hurt both asset classes. The hedge works when the Fed is easing or likely to ease; it fails when the Fed is tightening. Current 2026 regime has TLT partially restoring its hedge role but not to the full pre-2022 strength.
Why did bonds fail to hedge stocks in 2022?+
The 2022 inflation was the most severe in 40 years, peaking at 9.1 percent CPI in June 2022. The Fed's response was the most aggressive tightening cycle in four decades, raising the fed funds rate from near zero to 4.375 percent by year-end. Rising rates directly hurt bonds (TLT -33 percent) while also raising discount rates on equity valuations and compressing corporate margins (SPY -18 percent). When inflation is the dominant macro driver rather than growth, the stock-bond correlation flips positive and bonds cease to be a hedge. The 60/40 portfolio posted negative 17.5 percent, its worst year since 1937.
What is the ideal allocation between stocks and bonds?+
There is no universal answer. The traditional 60/40 (60 percent stocks, 40 percent bonds) has a 50-year track record and is appropriate for long-horizon investors with moderate risk tolerance. Younger investors with longer horizons often use 80/20 or 90/10. Retirees often use 40/60 or 30/70 to reduce drawdown risk. Alternative frameworks like risk parity weight by volatility rather than dollars; all-weather portfolios add gold and commodities for inflation regimes. The key question is whether inflation regime risk is acknowledged. Pure 60/40 with TLT is vulnerable to 2022-style episodes; adding TIPS or gold reduces that vulnerability.
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Data sourced from FRED, CoinGecko, CBOE, and other providers. This page is for informational purposes only and does not constitute financial advice. Past performance does not guarantee future results.