How to hedge inflation with TIPS and other investments
As inflation remains above the Federal Reserve's target, investors are exploring Treasury Inflation-Protected Securities (TIPS) and other commodities as potential hedges. Despite recent volatility in bond markets, rising yields have made these assets increasingly attractive to wealth managers.
Why it matters
Understanding inflation hedging strategies is critical for individual investors and financial planners navigating a high-interest-rate environment.
Inflation will be in the crosshairs Wednesday as investors digest the latest Consumer Price Index. The reading may be one more sign that inflation remains a problem that isn't going away.
It's a tricky situation for investors looking for protection, but there are some good ways to get it.
Treasury Inflation-Protected securities (TIPS) are one option with "real" yields now at multi-decade highs. Beyond TIPS, analysts suggest commodities, infrastructure, and other assets that can hedge against rising prices.
While inflation is down sharply from its 9.1% peak in 2022 — a supply shock due to the Covid pandemic — it's still well above the Federal Reserve's 2% target. The headline Consumer Price Index is expected to hit 3.6% in September, partly due to rising energy costs stemming from the war with Iran. The Personal Consumption Expenditures index, the Fed's preferred gauge, was at a 3% core rate in August.
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