Guild Basic Needs IndexTM

Guild Basic Needs IndexTM

July 2013

August 22, 2013



Are Interest Rate Increases Signaling Higher Inflation on the Horizon?

 

Since bottoming in 2012, U.S. interest rates have been rising -- the exception being short-term interest rates, which are set by the Federal Reserve.  There are a few key reasons for the rise in rates.  The most often cited reason is the feared end of QE by the Federal Reserve.  If the Fed stops buying bonds, who else will fund the U.S. government.  The bottom line is that after declining for 32 years, interest rates got too low, and now the interest rate that investors require to buy bonds maturing in three years or more have gone up significantly...and look like they are headed higher still.  Another reason for the rise is the fact that investors believe the low returns on bonds in recent years are not enough to protect their principal from the purchasing power decline that comes from a rising cost of living.  This is not just a U.S. phenomenon.

 

The rapidly rising U.S. interest rates are having important effects on world markets; one of them is the sudden decline in certain emerging market currencies.  India, Brazil, Turkey, Indonesia, and other countries have seen their currencies slide in recent weeks.  Central banks are acting to slow currency declines to fend off uncomfortable increases in inflation that result.  Inflation can be hard to contain and can spill across national or regional borders. 

 

Last year and earlier this year, we wrote about how inflation around the globe had moderated.  However, it appears that this trend may be coming to an end.  While not yet high in the developed world, price increases in the developing world should be closely monitored to see when they will arrive on our shores.  For example, food commodities rising in price in India due to poor rainfall during the annual monsoon will effect the price of food commodities on the other side of the world.  This is one reason we are watching the prices of certain basic needs closely and are tracking them here, in our Guild Basic Needs IndexTM (GBNI) to see if and when price changes abroad spill over into the U.S.


__________________________________________________________________

Exclusion of Liability

This website is for informational purposes only and is not intended to be a solicitation, offering or recommendation of any security. This website does not intend to provide investment, tax or legal advice. Guild Investment Management does not represent that the securities, products, or services discussed in this site are suitable or appropriate for all investors. The site may not meet your specific needs or requirements. Any market analysis constitutes an opinion that may not be correct. You must make your own independent investment decisions or obtain professional advice from your advisors before making investment decisions.

The information on this site is not intended for distribution to, or use by, any person or entity in any jurisdiction or country where such distribution or use would be contrary to law or regulation, or which would subject Guild Investment Management to any registration requirement within such jurisdiction or country.

The material on this site, including any opinions expressed herein, are subject to change without notice. In addition, there are many market, currency, economic, political, business, technological and other risks that are beyond our control. We make reasonable efforts to provide accurate content on the site. However, some content and some of the assumptions, formulas, algorithms and other data that impact the content may be inaccurate, outdated, or otherwise inappropriate. In addition, we may have conflicts of interest with respect to any investments mentioned on the site. Our principals and our clients may hold positions in investments mentioned on the site or we may take positions contrary to investments mentioned on the site.

BY USING THIS SITE YOU AGREE THAT GUILD INVESTMENT MANAGEMENT, INC. AND ITS PRINCIPALS ARE NOT LIABLE FOR ANY ACTION YOU TAKE OR ANY DECISION YOU MAKE IN RELIANCE ON ANY CONTENT. WE DO NOT GIVE INDIVIDUALIZED INVESTMENT RECOMMENDATIONS, OR ACCOUNTING, TAX OR LEGAL ADVICE ON OR THROUGH THE SITE.

Although the site includes investment related information, you should not consider anything you find on the site to be a recommendation that you buy, sell, hold or otherwise invest in an individual security, or any other investment or asset.

Certain of the content at this web site, including Guild’s current and past market commentaries, is protected by copyright. Apart from any use permitted under the Copyright Act, you must not copy, frame, modify, transmit or distribute the market commentaries, without seeking the prior consent of Guild.

You may have been referred to this site by some other person or organization or may have linked to this site from the website of another organization. We appreciate such referrals, but are not affiliated with any persons or organizations who may have referred us to you, and we do not pay for any such referrals. In addition, any persons making referrals are not responsible for Guild’s portfolio management decisions, which are the sole responsibility of Guild.

Tel: (310) 826-8600 | Fax: (310) 826-8611 | Email: guild@guildinvestment.com
12400 Wilshire Boulevard, Suite 1080, Los Angeles, CA 90025
Copyright © 2012 Guild Investment - All Rights Reserved