Transcript of the podcast:
After You Listen
- If you'd like to learn more about investments that could help you protect against inflation, including our ETF and mutual fund Select lists, check out Schwab.com/Research.
- Follow Mark Riepe and Kathy Jones on Twitter: @MarkRiepe and @KathyJones.
Since the financial crisis of 2008, the Federal Reserve has engaged in a great experiment: They are testing whether massive amounts of new money can heal the damage from macroeconomic catastrophes, such as the financial crisis and the COVID-19 pandemic. For years, investors have asked persistent questions about the likelihood of high inflation and how to help protect a portfolio against it.
In this episode, Mark speaks with Kathy Jones, Schwab's chief fixed income strategist. They discuss the history of inflation in the U.S. economy—including the gold standard and the key players at the Federal Reserve—as well as hyperinflation and recent fears of rising prices.
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Fixed income securities are subject to increased loss of principal during periods of rising interest rates. Fixed income investments are subject to various other risks including changes in credit quality, market valuations, liquidity, prepayments, early redemption, corporate events, tax ramifications and other factors. Lower rated securities are subject to greater credit risk, default risk, and liquidity risk.
Treasury Inflation Protected Securities (TIPS) are inflation-linked securities issued by the US Government whose principal value is adjusted periodically in accordance with the rise and fall in the inflation rate. Thus, the dividend amount payable is also impacted by variations in the inflation rate, as it is based upon the principal value of the bond. It may fluctuate up or down. Repayment at maturity is guaranteed by the US Government and may be adjusted for inflation to become the greater of the original face amount at issuance or that face amount plus an adjustment for inflation.
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