Inflation stays stubbornly high

Inflation has fallen sharply from its nine point one percent peak in twenty twenty-two but remains well above the Federal Reserve's two percent target.

Consumer worry about prices rising

The New York Fed's Survey of Consumer Expectations showed the one-year inflation outlook in September climbed to three point nine percent, its highest level since May twenty twenty-three.

TIPS offer high yields but mixed returns

Treasury Inflation-Protected securities, or TIPS, have real yields now at multi-decade highs. The ten-year TIPS yield is currently at two point eight seven percent, levels not seen since November twenty twenty-eight.

TIPS funds have lost money this year

The iShares TIPS Bond ETF, which tracks the ICE U.S. Treasury Inflation Linked Bond Index, has a total return of minus one point one six percent year-to-date due to rising interest rates.

How TIPS protect against inflation

TIPS pay a fixed coupon but as inflation rises, the principal value of the bond increases based on changes in the non-seasonally adjusted CPI for All Urban Consumers, with a three-month lag.

Rising real yields hurt TIPS prices

TIPS' poor performance this year isn't because of a surge in inflation expectations.Almost all the increase has been due to rising real yields, driven by robust economic growth and a U.S.

Short-term TIPS look more attractive

Short-term TIPS provide more protection against rate increases and look attractive. Funds focusing on short-term TIPS include Vanguard Short-Term Inflation-Protected Securities ETF, iShares zero to five Year TIPS Bond ETF and PIMCO one to five…

Diversify with commodities and gold

Rick Rieder, BlackRock's chief investment officer for global fixed income, suggests a multi-pronged strategy including equities, commodities and alternative assets.

Infrastructure offers inflation protection

Infrastructure operators of roads, ports and bridges tend to be toll takers, collecting long-term revenue under contracts that include inflation riders or built-in price adjustments.

Multi-asset funds combine strategies

Broad inflation-protection funds include State Street Multi-Asset Real Return ETF, Fidelity Strategic Real Return Fund and PIMCO Inflation Response Multi-Asset Fund. The PIMCO fund's holdings include TIPS, commodities, gold and real estate investment trusts.

Supply shocks could push inflation higher

Jason Draho, head of asset allocation Americas at UBS Global Wealth Management, says it makes sense to add protection against another move higher.

“The risk now is there will be supply side shocks that could push up inflation again.”