State Street’s Bartolini on inflation-resilient portfolios

Matthew Bartolini, global head of research strategists at State Street Investment Management, said persistent inflation and shifts in global supply chains are prompting investors to add inflation-protected bonds, commodities and other real assets to portfolios.

He pointed to CPI and PPI readings that go beyond energy and housing effects. Measures that strip out energy and housing — the Supercore CPI — are “continuing its upward trend” and are now above 3 percent, he noted. Slower-moving measures such as Sticky CPI are also rising.

Bartolini described several drivers of those pressures: tariffs, supply-chain reconfiguration and a surge in capital spending on artificial intelligence infrastructure that is competing for components and inputs. He said upstream PPI for manufacturing components and ISM prices‑paid data are at levels not seen since 2022.

Investors have increased exposure to inflation-linked assets. State Street offers multiple ETFs in the space, including SPIP (SPDR Portfolio TIPS ETF), WIP (SPDR FTSE International Government Inflation-Protected Bond ETF) and TIPX, a one- to ten-year inflation-protected ETF. He highlighted TIPX as a shorter-duration option that, in his words, “cuts off the tail in duration.”

He cautioned that inflation-linked bonds remain bonds and can lose value if higher inflation leads to higher interest rates or rising term premiums. He recommended managing duration risk by buying shorter-dated TIPS or replacing some Treasury exposure with inflation-protected bonds to remain duration matched.

Beyond TIPS, he pointed to commodity and real-asset demand. He linked inflows into broad commodity ETFs in May to rising spot prices driven by choke points such as disruptions in the Strait of Hormuz and supply-chain shifts late last year. “Rising commodity prices have an impulse to inflation,” he said.

On multi-asset approaches, Bartolini mentioned funds that combine inflation-sensitive holdings. He cited Bridgewater’s ALLW as one example and described State Street’s RLY as a blended real-return fund that includes inflation-linked bonds, natural-resource equities, commodities and real estate.

He noted that inflation-linked exposures are a small share of fixed-income assets — roughly 2.3 percent — while equities represent about 65 percent of total assets in the global mutual fund and ETF universe. He said that allocation mix is one reason investors are reexamining portfolio structure.

Regarding the long-standing 60/40 mix, he said it has performed well when growth rises and inflation falls and should be reassessed given trade realignment, signs of deglobalization and more volatile inflation expectations.

Bartolini discussed these views in the context of portfolio construction and product options for investors seeking inflation sensitivity.