How Five Pros Aim to Inflation-Proof Their Investments

Some on Wall Street think the fight to stabilize prices isn't over

- MATT WIRZ AND VICKY GE HUANG

Some on Wall Street are worried that inflation and interest rates could rebound.

Stock indexes are setting new records, bitcoin hit $100,000 and the Federal Reserve just cut rates for the third time in less than six months.

Still, some investors are switching to defensive strategies as they enter 2025 because they think the fight to stabilize prices isn't over.

There was persistently hot economic data even before Donald Trump won the election on a platform of trade tariffs and immigration crackdowns, both historically inflationary policies. Bond yields also rose sharply in the last quarter of the year, stoking fears that rates and inflation would jump in tandem, sparking a repeat of the 2022 market selloff.

Here is a look at what some money managers are doing to protect their portfolios:

Greg Lippmann

You know him as the trader played by Ryan Gosling in "The Big Short" who made a fortune betting against subprime mortgage bonds.

Nowadays Greg Lippmann runs his own $11 billion hedge-fund firm called LibreMax Capital. It made money in 2022-a down year for most investors- thanks to another unconventional bet, this time on interest rates.

Lippmann doubted consensus views that post-pandemic inflation was transitory. He purchased derivatives that gained when rates rose, outweighing, or hedging, losses from the asset-backed bonds LibreMax primarily invests in.

The firm profited from the hedges in 2023 and 2024 too, and still holds about 50% more interest-rate swaps than it normally owns, a person familiar with the matter said.

"There is complacency out there that rates are going to go down and there's an unappreciated risk of the 10-year suddenly spiraling to 5% or 5.5% in a matter of weeks," Lippmann said.