U.S. Treasury Inflation Protected Securities (TIPS) are both credit risk and inflation risk free.

If inflation starts rising, the yields for U.S. Treasury Inflation Protected Securities (TIPS) will actually fall and their prices will rise because the demand for them increases as investors seek out their inflation protection.

In the early expansion phase of the business cycle, stock prices are increasing. This is due to the fact that sales are increasing but inputs costs will be fairly stable. Labor will not ask for wage increases because unemployment is still high. Idle plant and equipment will be pushed into service at little cost. Furthermore, firms usually emerge from recession leaner because they have shed their wasteful projects and excessive spending. Later on in the expansion, the growth in earnings and stock returns slows because input costs start to increase. Interest rates will also increase during late expansion, which is a further negative for stock valuation.