Expert perspective

The potential for higher inflation: What can investors do about it?

April 01, 2021

It's not hard to see why.
Key points:
Long-term trends
Inflation in the short to medium term
Inflation expectations have been increasing from very low levels last year
This line chart shows the 10-year U.S. Treasury yield, the 10-year TIPS yield, the 10-year breakeven inflation (BEI) rate, and the Federal Reserve’s target inflation rate of 2% a year. The 10-year breakeven inflation rate rose above the Fed’s target in early 2021. The 10-year Treasury yield turned higher in September 2020. The 10-year TIPS yield turned higher earlier this year.
How TIPS can help strategically
How TIPS can help tactically
Inflation expectations at historically rich levels
A box-and-whiskers chart shows that both the 2-year and the 10-year breakeven inflation expectations are now trading at high levels. The 2-year BEI rate is at the 91st percentile, while the 10-year breakeven rate is at the 70th percentile.
Other key risk factors: Duration and credit

Contributors

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Vanguard Insights

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