The Inflation-Proof ETF You Need in Your Portfolio

"Oil flowing through the Strait of Hormuz accounts for roughly 20% of the global oil supply, and that traffic has fallen to a near standstill. Goldman Sachs economists project Brent crude averaging $105 a barrel in March and $115 in April under a base case where Hormuz shipments remain disrupted for six weeks, with Brent peaking at $140 a barrel in an adverse scenario."

"iShares TIPS Bond ETF holds U.S. Treasury Inflation-Protected Securities, government bonds whose principal is indexed to the Consumer Price Index. When CPI rises, the bond's face value adjusts upward. Since the coupon is a fixed percentage of that adjusted principal, both income and redemption value grow with inflation."

"TIPS are priced on real yields, which are nominal Treasury yields minus inflation expectations. When real yields fall, TIPS prices rise. When real yields rise sharply, as they did during the 2022 Federal Reserve hiking cycle, TIPS prices fall even if headline inflation is soaring."

The Strait of Hormuz is crucial for global oil supply, accounting for 20%. Disruptions have led to projections of Brent crude prices reaching $140 per barrel. This increase is beginning to affect consumer goods, including groceries and airline tickets. The iShares TIPS Bond ETF holds U.S. Treasury Inflation-Protected Securities, which adjust with the Consumer Price Index to provide real returns above inflation. TIPS prices are influenced by real yields, which can fluctuate based on interest rate changes, impacting investor returns despite rising inflation.

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