Skip to content
Matthew A. Winkler

Investors Brace for Inflation to Come Roaring Back

The scramble to stash cash in Treasury Inflation-Protected Securities tells you something.

Last month the bond market showed its greatest anxiety in almost a decade, after President Donald Trump signed a $1.5 trillion tax cut that benefits corporations and the richest Americans. The flow of funds into so-called TIPS, the Treasury Inflation-Protected Securities, reached a record in February -- a sign that investors are bracing for inflation.

TIPS were created in 1997 to ensure not a penny is lost when the cost of living suddenly spurts. The principal rises when the Consumer Price Index goes up. Early on, they didn't really have a chance to pay off. Starting in 1998, President Bill Clinton oversaw four successive budget surpluses (the only federal surpluses since Neil Armstrong walked on the moon). Inflation averaged a modest 2.6 percent during Clinton's two terms, less than half the 6.1 percent that unsettled investors between 1970 and 1992.