Positioning Your Bond Portfolio for Inflation

Tuesday, May 1, 2012


In recent years, as we have suffered through a weak domestic economy, inflation rates have been relatively modest and inflationary concerns have been largely out of the headline risks.  After experiencing negative inflation rates during the recession of 2009 recent inflation numbers have returned to a historically normal rate of around 3% (prices of all goods and services purchased).  It is interesting that while inflation has returned to near historically average numbers, interest rates in general (or real rates) remain near historically low levels.  In addition the FED remains extremely accommodating as the printing press of new dollars remains wide open as we attempt to prop up a generally weak domestic economy.

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