TIPS ETF (SCHP) Hits a New 52-Week High

For investors seeking momentum, Schwab US TIPS ETF (SCHP) is probably on radar now. The fund just hit a 52-week high and is up nearly 15.3% from its 52-week low price of $52.57/share.

But are more gains in store for this ETF? Let’s take a quick look at the fund and the near-term outlook on it to get a better idea on where it might be headed.

SCHP in Focus

The underlying Bloomberg Barclays US Treasury Inflation-Linked Bond Index (Series-L) includes all publicly-issued U.S. Treasury Inflation-Protected Securities that have at least one year remaining to maturity, are rated investment grade and have $500 million or more of outstanding face value. The fund charges 5 bps in fees (see all Inflation-Protected Bond ETFs here).

Why the Move?

Annual inflation rate in the United States increased to 0.6% in June of 2020 from May's four-and-a-half-year low of 0.1% and matching market forecasts. The latest reading of June came in at the highest in three months as businesses reopened after the coronavirus lockdown.

The uptick in inflation probably made the TIPS ETF a winner. TIPS ETFs offer robust real returns during inflationary periods unlike its unprotected peers in the fixed-income world. These securities pay an interest on an inflated-principal amount (principal rises with inflation) and when the securities mature, investors get either the inflation-adjusted principal or the original principal, whichever is greater. As a result, both principal amount and interest payments will keep on increasing with rising consumer prices.

More Gains Ahead? 

It seems that the fund will stay strong in the near term given a positive weighted alpha of 8.30. So, there is still some promise for investors who want to ride on this surging ETF.

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Schwab U.S. TIPS ETF (SCHP): ETF Research Reports
 
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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