More From Heather McArdle
A Look at the Outlook for TIPS
TIPS (VTIP) (TIP) are likely to underperform since inflation levels and growth rates are very low on a global level.
The Relationship between TIPS and the Break-Even Rate
Between Jan 2014 and September 2015, the break-even rate was higher than the CPI inflation rate, as markets were surprised by the sudden dip in oil (USO) prices.
How Can TIPS Add Value to Your Portfolio?
TIPS (TIP) are one one of the few securities that actually pay you directly for inflation. Unlike regular bonds that see an erosion in value when inflation rates rise, TIPS outperform.
What Does the Break-Even Rate Suggest?
The break-even rate is the difference between the yields of ten-year Treasuries (IEF) (TLH) and ten-year TIPS (VTIP).
How Should We Measure Inflation?
Investors pay close attention to inflation figures because they tend to affect their investments. Bond (BND) prices take a hit when inflation is rising or high.
How Are Inflation, Interest Rates, and Foreign Exchange Related?
A low rate of inflation doesn’t guarantee a favorable exchange rate. But a high inflation rate is likely to have a negative effect on a currency’s value.
How Central Banks ‘Create’ Inflation
A QE program doesn’t just create inflation; it causes asset prices to rise as well. After the financial crisis of 2008, the Fed resorted to an ultra-accommodative monetary policy.
What Is Demand-Pull and Cost-Push Inflation?
Both Russia (RSX) and Brazil (EWZ) are experiencing cost-push inflation. Both economies are highly dependent on commodities.
How Are Inflation and Interest Rates Related?
If inflation rises more quickly than the Fed’s estimate, the Fed could be forced to hike rates, which could stifle the economy and the Markets.