Money managers are increasingly turning to inflation-protected bonds as concerns over tariffs and rising prices grow. The Bloomberg Global Inflation Linked Index has surged 5% since Jan. 13, reflecting a shift toward hedging against inflation risks.
Federal Reserve Bank of Philadelphia President Patrick Harker warned that economic risks are rising due to increasing prices. Meanwhile, President Trump has urged patience as he pursues trade policy changes, downplaying the resulting economic strain as a “little disturbance.”
Uncertainty surrounding tariffs has triggered sharp stock market declines, a weaker dollar, and outflows from Treasury funds. However, inflation remains a looming risk, despite expectations for interest rate cuts.
Key market signals:
📌 Short-term inflation expectations have surpassed long-term ones.
📌 Inflation-linked bonds are seen as a “great option value” in case prices rebound, according to Bridgewater’s Bob Prince.
📌 Retail investors are expected to favor shorter-term Treasury Inflation-Protected Securities (TIPS).
Despite a difficult 2024, where the inflation-linked bond index dropped 4%, the latest rebound signals renewed investor interest in inflation hedging strategies.