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Time to be real again? TIPS to protect against inflation

13 January 2020

Inflation across most regions has started to accelerate over the past few weeks. The recent conflict between the US and Iran, on Iraqi soil, has also put pressure on oil prices. While the situation is still fluid, the sentiment driving markets recently, and the underlying dynamics, are well worth monitoring.

State Street Global Advisors does not anticipate an overshoot in inflation, but it is one of the risks, or grey swans, that remains on investors’ minds. Meanwhile, institutional investors have not necessarily favoured US TIPS lately, continuing a long-term trend. ETF flows for inflation-linked exposures were also somewhat unimpressive in 2019, with just $2.7 billion of inflows when fixed income ETFs gathered more than $260 billion in total.1

1Source: Bloomberg Finance L.P., as of 31 December 2019.

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