The Fed is Getting Tipsy on TIPS

By John Del Vecchio and Brad Lamensdorf

Inflation expectations are headline news recently. The big question on many market watchers’ minds is what impact the reopening of the economy post COVID and flush with stimulus will have on inflation. Many have downplayed inflation expectations and the view that there will be a huge burst of inflation in coming months.

If that’s the case, why is the Federal Reserve – which has a vast balance sheet – snapping up TIPS? And, not just snapping them up, but buying them hand over fist!

Take a look at this chart:

The Fed is Getting Tipsy on TIPS
The Fed is Getting Tipsy on TIPS

Going back about 17 years, the current TIPS buying from the Federal Reserve is not just outside the norm. It’s in another realm.

Inflation as measured by the CPI is controversial. After all, adjustments are made for advances in technology and its impact in keeping inflation suppressed, for example.

The simple question is what does the Federal Reserve know that we don’t?

Extremes in any market are where the best opportunities lie. And, this is extreme.

Active Alts uses dozens of indicators to monitor extremes and pounce on opportunities with tremendous risk / reward ratios in the market. Book a call with Brad to learn how these indicators can help you navigate the markets in 2021 and beyond.



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Downside deviation is a measure of downside risk that focuses on returns that sell below a minimum threshold of a Minimal Acceptable Return (MAR).
Sharpe ratio is the average return earned in excess of the risk free rate per unit of volatility of risk.
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Annualized volatility – Historic volatility measures a time series of past market prices. Implied volatility looks forward in time, being derived from the market price of a market-traded derivative (in particular, an option).
Max drawdown is an indicator of the risk of a portfolio chosen based on a certain strategy. It measures the largest single drop from peak to bottom in the value of a
portfolio (before a new peak is achieved).
(1) Indicators drive the exposure while a proprietary Long & Short portfolio are rebalanced monthly for the strategies equity drivers.
(2) Commissions were added to the exposure rebalance as well as the monthly stock rebalance.


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