nisiprius wrote:And there are several absolutely direct tools to address inflation: TIPS, series I savings bonds, and inflation-indexed SPIAs. None of these makes much money for the investment industry, and, understandably, there is a long tradition of saying "if you are worried about inflation, then address it with all these others things that ought to, theoretically, logically, sorta-kinda-tend-to track inflation." But all of them are indirect, loose, unreliable, and don't hold up well on examination of actual past history.
That's a good point assuming you have a higher level of fixed income than equity in retirement. In that case it probably doesn't matter that much what your stock allocation as it does having inflation protection in your bond portion. But if I had more equities than fixed income in retirement I'd probably still want a decent chunk of foreign stocks.
nisiprius wrote:For example, it sounds logical to say that if the dollar weakens, consumers will experience inflation, due to the increased prices of imported goods. And yet, just think about personal experience. Since TIPS were introduced in 1997, what is the only sustained period of serious dollar weakening? 2002-2008. Did you notice serious inflation during that time? I didn't. In fact, one of the knocks on TIPS is that they haven't been tested because there hasn't been any serious inflation since they were introduced.
I didn't notice serious inflation during that time, but I did notice significant international stock outperformance over US stocks during that time. If there does come a time in the future of higher inflation and a falling dollar, I would expect my international stocks to fare better than my US stocks (or at least less poorly). Of course, we haven't seen anything like that since the 1930s/1940 & 1970s, so I'm just making an educated guess based on past historical performance.