BCI - Hedging Inflation Risk With ETFs

• Inflation has jumped recently. Aggressive fiscal and monetary policy may mean more inflation lies ahead.
• I tested various categories of ETFs by correlating their returns with concurrent changes in monthly Treasury-TIPS breakeven inflation rates.
• Some so-called inflation hedges fared quite poorly, including gold, bitcoin, and real estate securities. Even broad TIPS funds did not hedge inflation as it was happening month-to-month.
• Short-term TIPS funds were quite effective, however, as were broad commodity funds and some inflation-sensitive equities, such as natural resources stocks.
• One ETF, SPDR SSgA Multi-Asset Real Return ETF, combines many of the best inflation-hedging assets in one fund, and was very good at hedging inflation risk.

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