Hello friends.
There is an interesting correlation between the TIP ETF and inflation. TIPS stands for Treasury Inflation-Protected Security. These are fixed-income assets with a built-in hedge against inflation, so investors buy TIP when they expect high inflation and sell TIP when they expect low inflation. There is a clear lag between the movements in the price of TIP and the ultimate movement of CPI inflation for the USA.
Every time there has been a substantial crash in the price of TIP, there has subsequently been a period of deflation where the YoY CPI fell substantially.
TIP has fallen an impressive 15% from its high, a crash second only to the global financial crisis. Because of this, we can expect a substantial amount of deflation in the coming years.
Our forecast for the annual CPI reading at the end of 2023: 6.0% or a bit lower
Note that this relationship works the other way as well. If TIP rises, we should expect higher inflation in the near future. TIP actually predicted this massive rally in inflation by rising dramatically long before the CPI did.
There is an interesting correlation between the TIP ETF and inflation. TIPS stands for Treasury Inflation-Protected Security. These are fixed-income assets with a built-in hedge against inflation, so investors buy TIP when they expect high inflation and sell TIP when they expect low inflation. There is a clear lag between the movements in the price of TIP and the ultimate movement of CPI inflation for the USA.
Every time there has been a substantial crash in the price of TIP, there has subsequently been a period of deflation where the YoY CPI fell substantially.
TIP has fallen an impressive 15% from its high, a crash second only to the global financial crisis. Because of this, we can expect a substantial amount of deflation in the coming years.
Our forecast for the annual CPI reading at the end of 2023: 6.0% or a bit lower
Note that this relationship works the other way as well. If TIP rises, we should expect higher inflation in the near future. TIP actually predicted this massive rally in inflation by rising dramatically long before the CPI did.