I began 2012 with this post about the tight correlation between the 10-year TIPs spread (the market’s inflation expectations) and the S&P 500 index. Despite the recent 11% broad market correction, TIPs did not flinch, as you can see on the weekly chart below dating back to the March 2009 deflationary crash, bear market bottom. All things considered, I find the action in TIPs quite interesting considering the strength in TLT and the U.S. Dollar. I will continue to monitor TIPs to see how sustainable this move is and, ultimately, what effect any weakness would have on equities, since we know that strength in TIPs has coincided with a cyclical bull market.
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Yes, I still hold TBT as a “hedge.”
More like a hedge hog.
In my pants …
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TBT as anything other than a hedge for a day trade is indeud prickly.