Opinion: What asset is the perfect inflation hedge?

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The perfect inflation hedge could very well turn out to be a terrible investment. That’s crucial information if you’ve been spooked by recent reports that inflation has spiked upward and might remain high—or even go higher. The latest CPI report, released in mid-September, showed inflation to be running at (but for a brief exception in 2008) the highest rate in three decades. Retirees have the most to lose from high inflation, since they tend to hold an outsize proportion of their portfolios allocated to fixed income investments. So it’s understandable that they have been asking which assets are the best inflation hedges. It turns out that there is no one answer to their question. It depends crucially on the time frame over which one measures an asset’s correlation with the Consumer Price Index. When focusing on short-term periods, one asset will emerge as having the highest correlation. When instead focusing on longer periods, in
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