Last year’s sudden plunge in oil prices has helped keep prices low, but the Fed believes the drop in oil prices will only be short-term. However, the stronger dollar is a dominant factor in keeping commodity prices depressed. Consequently, the low-inflation environment is also fueling bets that the Fed could push off any interest rate hikes.
There are other signs those betting on a rise in TIPS and TIP are on the right track. For example, the United States Oil Fund (NYSEArca: USO) is up more than 21% over the past month. Last week, investors pulled a combined $400 million from the SPDR S&P Retail ETF (NYSEArca: XRT) and the Consumer Discretionary Select Sector SPDR (NYSEArca: XLY), two ETFs that would be vulnerable to consumer retrenchment if prices spike.
iShares TIPS ETF
ETF Trends editorial team contributed to this article.