No one, though, should view inflation as some guarantee for making money on a TIPS fund.

“One of the biggest misconceptions about TIPS is that inflation simply needs to be high for them to outperform. That’s not how it works,” said Sam Huszczo, founder of SGH Wealth Management in Southfield.

“What matters is whether inflation comes in higher than the bond market already expects,” Huszczo said. “In other words, what’s already baked into the price.”

“And here’s the catch: You can be absolutely right about inflation and still lose money in a TIPS fund if real interest rates rise. Inflation protection doesn’t eliminate interest-rate risk,” he told the Detroit Free Press.

Right now, he said, much of the forecast for inflation depends heavily on what happens with the war in Iran.

“Energy has become one of the biggest wild cards in forecasting inflation for 2027,” Huszczo said.

If the U.S. withdraws from the Iran war and the Strait of Hormuz reopens, he said, energy prices would likely decline.

“Suddenly, we could find ourselves in an environment where inflation falls short of expectations, potentially favoring traditional Treasuries over TIPS.”

Huszczo said he would not attempt to make a prediction on the war. At the same time, though, savers should take geopolitical risks into account if deciding to move a lot of money into TIPS at this point.

He noted that the bond market, as of Oct. 30, was pricing in approximately 2.34% average annual inflation over the next decade.

“Whether inflation ultimately exceeds or falls short of what’s already priced in will be a major factor in determining how TIPS perform relative to traditional Treasuries.”