tahirg0010

Inflation Trade

Long
TIP/IEF  
TIP/IEF  
In the chart below you have the TIP and IEF the IEF ratio. IEF is Ishares 7-10 year treasury bond ETF and TIP is the TIPs bond etf . On the right side of the chart you have the 10 year inflation breakeven. Now looking at the two you can see that they track pretty closely. Now generally the IEF 7-10 year has a very similar duration to that of the TIP etf .

Some people are wondering how to play the inflation hedge as with some of the largest tech stocks P/E multiple compression could pose an issue to high P/E ratio trading stocks. What does this mean, and what is multiple compression. Well what happens as inflation rises that inflation starts to be built into P/E multiples, and as that happens you start to get compression of those P/E multiples this can pose a massive risk to equity holders.

So my thesis would be you could short IEF , and be long TIP. This is something to look into, and I believe that spread that you can see below is going to widen tremendously. So it is something to watch out for, and a trade you might want to consider setting up.