SCHP - SCHP: Offers Compelling Value Here

2024-04-12 08:09:02 ET

Summary

• SCHP holds a portfolio of long-duration treasury inflation protected securities ("TIPS").
• Elevated inflation should boost principal adjustments to SCHP. But with the Fed likely to stand pat unless inflation reaccelerates out of control, so further NAV declines may be limited.
• On the other hand, if the economy weakens, the Fed appears ready to lower interest rates to support jobs, which should boost NAV for SCHP.
• I am raising my rating on the SCHP ETF due to this asymmetry in outcomes.

On a day (April 10th, 2024) where the Consumer Price Index ("CPI") surprised forecasters to the upside on both headline and core readings (Figure 1), investors might naturally be inclined to seek the safety of Treasury Inflation-Protected Securities ("TIPS")....

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