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.”

Roundhill Investments’ Memory ETF (DRAM) recently did what many analysts thought was impossible.

The fund first rivaled and then surpassed new-issue growth records previously set by the mighty iShares Bitcoin Trust ETF (IBIT). Specifically, it managed to pull in a record $6.5 billion in assets over its first 36 trading days and is now sitting at a healthy $10 billion. That success, according to analysts, is the latest sign of ballooning investor confidence in artificial intelligence and data center construction, which is supercharged by serious supply constraints in the memory chip manufacturing sector. Investors, as they are wont to do, are already on the lookout for the next bottleneck trade that could deliver DRAM-like performance, and one potentially fruitful area is photonics.

Photo, What Now?

For those of us who fell asleep in science class, photonics is a multidisciplinary domain that involves the generation, control, manipulation and detection of light. Some experts argue the massive internet bandwidth demands of the AI revolution will catapult fiber-optic manufacturers into the spotlight, per an ETF.com report.

The recent launch of the Corgi Lithography & Semiconductor Photonics ETF (EUV) could be a test case:

• The asset manager broke a single-day launch record when it rolled out 34 ETFs earlier this month, and EUV was one of them.
• However, the fund has been slow out of the gate, collecting just $57 million in assets, although some may say it’s just ahead of its time.

Hey, ChatGPT: In addition to photonics, what are some other potential bottleneck trade themes, you ask? Well, one popular AI tool came up with a surprising answer that may need fact-checking. “Advanced packaging is one of the most ‘inside baseball’ bottlenecks,” it said. “The issue isn’t only making AI chips — it’s packaging them together with memory at scale.”

Man, we miss the em dash.

Dollars, who? Stablecoins are where it’s at for many large investors, and asset managers are taking notice.

Tokenization has become Wall Street’s answer to attracting the large institutions and crypto firms opting to hold their cash in stablecoins as opposed to the traditional routes. Some of the largest asset managers are now launching new products to woo those investors. BlackRock filed for a new tokenized money-market fund and digital class of existing fund this month. The BlackRock Daily Reinvestment Stablecoin Reserve Vehicle will invest in cash, short-term US Treasury securities and overnight repurchase agreements secured by Treasuries, according to the filing. The other is an onchain share class of its BlackRock Select Treasury Based Liquidity Fund. Both funds have a $3 million minimum investment.

Heading Onchain

BlackRock is far from the only asset manager looking for ways to appeal to the crypto-native masses. Earlier this month, State Street Investment Management launched the State Street Galaxy Onchain Liquidity Sweep Fund, a tokenized cash-management product allowing large stablecoin holders to sweep their assets into an on-chain, yield-bearing asset.

The firm aims to bridge traditional finance with the rapidly evolving digital asset ecosystem, “bringing familiar, high-quality investment strategies into a format that aligns with how a growing cohort of investors hold and manage their capital on chain,” Kim Hochfeld, global head of cash, securities lending and digital assets at State Street, told ETF Upside.

• The firm’s first tokenized product represents an important milestone for State Street. “It serves as a foundational step toward scaling a broader suite of on-chain investment solutions, positioning State Street at the forefront of the convergence between traditional asset management and blockchain-enabled finance,” Hochfeld said.
• The future of asset management will span both traditional and blockchain-based products, she added, whether those are onchain or through more traditional vehicles like exchange-traded funds.

BlackRock declined to comment on the filings.

Need for Speed: State Street’s fund launches on the Solana blockchain, and plans to integrate with Stellar and Ethereum. It’s a shift from institutional risk to architectural risk, said Gabriel Shahin, founder and CEO of Falcon Wealth. “With a traditional Treasury fund, you’re essentially trusting the ‘armored truck,’ meaning the infrastructure is slow, but it’s proven,” he said. State Street’s fund trades that for the speed of Solana. “It’s like upgrading from a horse and buggy to an F1 car. The speed is incredible, but at 200 mph a technical glitch is instantaneous and irreversible.”