Inflation Is Heating Up. So Are These TIPS Funds

May 18, 2026

It’s not just tomato prices that are heating up.

The Consumer Price Index spiked 3.8% year over year in April, and experts predict it could balloon to 4.2% in May, which would mark the highest jump since April 2023. As prices surge, investors are looking to strategies that may benefit from higher prices. But interest in these products goes beyond recent events, said Matt Bartolini, global head of research strategists at State Street Investment Management, adding that the economy never fully recovered from the high inflation shock of 2022.

“It’s not [just] a May 2026 trend,” he said. “Given the transformation of our macro backdrop starting last year around Liberation Day, any positive momentum that monetary policy had towards bending the inflation curve lower… [has] really blunted.”

TIPS Jar

There are three popular types of funds that target inflation: ETFs that invest in treasury inflation-protected securities, real asset-based ETFs and alternative products that use complex options strategies. TIPS are government bonds designed to protect against inflation by increasing the principal investment by a corresponding percentage when prices rise; that boosts interest payments since the rate is applied to a higher amount. They may have relatively lower interest rates to start with, however, and they tend to carry “pretty significant durations,” said Greg Stumm, CEO of American Beacon Partners. This caused ETFs holding the bonds to underperform in 2022. “TIPS were down pretty significantly in that inflationary period,” he said. “It’s because it was unexpected. TIPS captured inflation, but interest rates spiked, so their duration was a negative driver of returns.”

Still, interest in TIPS has grown in recent months, with inflation-linked bond ETFs attracting $650 million in assets in May and $5 billion this year, according to State Street data. The largest products are:

The Vanguard Short-Term Inflation-Protected Securities ETF (VTIP), which manages $18 billion in assets and is up 2% year to date.
The Schwab US TIPS ETF (SCHP), which oversees $15 billion and grew 1.59% year to date.
The iShares 0-5 Year TIPS Bond ETF (STIP), which also manages $15 billion and grew 2.07%.

TIPS and Tricks: Whether buying inflation-linked bond ETFs is appropriate depends on the client’s strategy, according to Stumm. They’re probably best for someone who thinks inflation is going to increase more than 3% a year for the next five years, he said. “But, if you’re saying: ‘Hey, I’m worried about inflation over the next six to 12 months. I’m going to buy an ETF and hold for that period.’ [Then] a TIPS ETF does not make a lot of sense to me.”