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This Week's Bonus Story
$39 Trillion Debt Signal: 3 TIPS ETFs to Hedge Persistent InflationSubmitted by Chris Markoch. Published: 4/19/2026. 
Key Points
- Surging U.S. debt and refinancing needs may keep inflation structurally elevated.
- TIPS ETFs provide built-in inflation protection through CPI-adjusted principal and income.
- Investors can choose between short-, intermediate-, and long-duration TIPS strategies depending on risk tolerance.
- Special Report: Elon Musk already made me a “wealthy man”
A recent report from the U.S. Treasury Department received less press than it should have. The "2025 Financial Report of the United States Government" showed that the gross national debt as of Sept. 30, 2025, was $37.6 trillion. Real-time tracking released in April puts the updated figure at $39 trillion. That number is hard to grasp, but for investors it contains an important signal about inflation. This isn't alarmist rhetoric—it's simple math. In 2025 the federal government paid approximately $970 billion in interest on its debt—more than the entirety of the widely publicized defense budget. As the debt grows, so too will interest costs.
Liberation Day wiped over $2 trillion from markets in a single day. Then a 90-day tariff pause added $4 trillion back to the S&P 500. Trump's AI initiatives sent Palantir up over 140%. Trader Larry Benedict says all of that was just the warm-up.
Benedict is calling what comes next 'Project 2026' - a move he believes could send billions, potentially trillions, into overlooked corners of the market. He's identified one ticker sitting at the center of it all, and he's revealing the name today at no cost. Larry is calling it "Project 2026."
That dynamic gives the U.S. government both motive and ability to tolerate modestly higher inflation. It's one reason there's a divide between some economists and government officials about the path for interest rates. The irony: the most likely catalyst for rate cuts may not be a slowing economy but roughly $10 trillion in debt coming due in 2026 that will need to be refinanced at whatever rate the market demands. For investors, that makes preparing now for higher inflation later a prudent consideration. The Case for Inflation-Protected SecuritiesSince 2022 the Federal Reserve has largely focused on tamping down inflation. That allowed long-term interest rates (for example, 10-year Treasury notes) to rise above short-term rates (for example, two-year Treasury notes). When the Fed begins cutting rates—as it started to in 2024—the yield curve begins to flatten. The wild card is inflation, which remains structurally elevated. The central bank's target is 2%, but current readings are nearer 2.8%–3%. If policymakers find a slightly higher inflation rate convenient—because it reduces the real debt burden and real interest costs—that has implications for investors. Using inflation to erode the real value of debt is not unprecedented; the most recent example came after World War II as the country worked down wartime obligations. Revisiting that playbook would make Treasury Inflation-Protected Securities (TIPS) a sensible option for investors seeking to stay ahead of inflation. It also explains the popularity of Series I Savings Bonds in 2022, though I bonds come with limitations (a $10,000 annual purchase cap and a one-year lock-up period). That helps explain why exchange-traded TIPS-related securities can serve as practical inflation hedges in portfolios. Investors should consult their financial planner or tax professional to determine which, if any, of these investments suit their individual circumstances. SCHP: The Core Holding for Broad TIPS ExposureFor investors seeking straightforward inflation protection without making an explicit duration bet, the Schwab U.S. TIPS ETF (NYSEARCA: SCHP) is a logical choice. The fund tracks the Bloomberg U.S. Treasury Inflation-Protected Securities Index and holds TIPS across short, intermediate and long maturities. Here's why that matters: when the Consumer Price Index (CPI) rises, the principal value of each underlying TIPS bond adjusts upward. Interest payments are calculated on that adjusted principal, so income rises with inflation as well. It's a dual-protection mechanism that nominal Treasuries do not provide. With an expense ratio of just 0.05%, SCHP is a low-cost way to gain broad TIPS exposure. The tradeoff is duration risk: with an effective duration around 6.5 years, rising real interest rates will pressure the fund's price. For investors who believe inflation will remain structurally elevated while the Fed eventually cuts rates, that tradeoff can be acceptable. VTIP: The Conservative Play for Rate-Sensitive InvestorsNot all investors are willing to accept meaningful duration risk while waiting for a Fed pivot. For those who expect elevated inflation but are uncertain about the timing of rate cuts, the Vanguard Short-Term Inflation-Protected Securities ETF (NASDAQ: VTIP) offers a more defensive way to express the same thesis. VTIP focuses on TIPS with maturities of zero to five years, keeping its weighted average maturity around 2.5 years. That shorter duration makes the fund far less sensitive to movements in real interest rates than a broad TIPS fund such as SCHP. If real rates continue rising before the Fed pivots, VTIP should suffer much less price damage. The inflation-protection mechanics are the same: principal adjusts with CPI and income follows. Because the underlying bonds mature relatively quickly, VTIP can reinvest into newly issued TIPS at current real yields, giving it a natural repricing advantage in a rising-rate environment. With an expense ratio of 0.07%—only marginally higher than SCHP—VTIP remains a low-cost, defensive tool for investors who want to hedge inflation without taking a long-duration view. Think of it as the defensive lineman of the TIPS lineup: not built for maximum upside, but designed to hold the line. LTPZ: The High-Conviction Bet on Persistent InflationIf VTIP represents the conservative end of the TIPS spectrum, the PIMCO 15+ Year U.S. TIPS ETF (NYSEARCA: LTPZ) sits at the other extreme. The fund holds TIPS maturing in more than 15 years, making it one of the longest-duration inflation-protected instruments available to retail investors. With duration currently above 20 years, LTPZ moves substantially as real interest rates change. That profile suits only investors with a suitable risk tolerance, because long-duration TIPS are the most leveraged way to play a financial-repression scenario. If inflation persists at 3% or higher while the Fed ultimately cuts rates to ease the refinancing burden on roughly $10 trillion in maturing debt, long real yields could compress sharply. In that case, LTPZ could benefit from both inflation adjustments to principal and price appreciation from falling real rates. The risk is real: if real rates continue rising before any policy pivot, LTPZ can suffer steep losses—its worst stretches, including 2022, produced double-digit declines. For that reason, this fund should be a high-conviction, satellite position held only by investors who have a strong macro view and the stomach to ride out significant volatility. |
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