Mutual fund investors seeking low inflation rates will find only a few places that can provide such shelter -- and how long it can continue remains to be seen.
There is a real danger that we may be on the cusp of a runaway inflation rate around the world. The data below compare the year-over-year percentage price increases for 2007 and 2008. To be clear, the data for 2008 comprises mostly 2007 inflation rates, which were relatively tame, and only the first four months of 2008, where we have started to get a real feel for the underlying inflation in the global picture. If inflation rates of goods and services continue to rise, the Federal Reserve -- and other global central banks -- may be compelled to raise interest rates, which usually helps contain inflation. That should cause asset prices to fall. If we look at the major regions and economies, we see that Canada and the U.K. both have lower rates of inflation compared with 2007. Fund investors looking to avoid inflation may want to target funds exposed to these two economies. Note that Japan is positive after years of deflation, while the U.S. and eurozone are moving into worrisome rates of inflation. The remainder of the year may see further pricing pressures.| Consumer | Consumer | |||
| Prices | Prices | |||
| YOY % | YOY % | |||
| (04/23/08) | (04/25/07) | Difference | ||
| U.S. | 4.00% | 2.80% | 1.20% | |
| Euro Region | 3.60% | 1.90% | 1.70% | |
| Japan | 1.00% | -0.20% | 1.20% | |
| Germany | 3.00% | 1.90% | 1.10% | |
| France | 3.20% | 1.20% | 2.00% | |
| Italy | 3.30% | 1.70% | 1.60% | |
| U.K. | 2.50% | 3.90% | -1.40% | |
| Canada | 1.40% | 2.30% | -0.90% | |
| Source: Bloomberg | ||||
| Consumer | Consumer | |||
| Prices | Prices | |||
| YOY % | YOY % | |||
| (04/23/08) | (04/25/07) | Difference | ||
| Australia | 4.20% | 2.40% | 1.80% | |
| China | 8.30% | 3.30% | 5.00% | |
| HongKong | 4.20% | 2.40% | 1.80% | |
| India | 5.50% | 7.60% | -2.10% | |
| Indonesia | 8.20% | 6.50% | 1.70% | |
| Source: Bloomberg | ||||
| Consumer | Consumer | |||
| Prices | Prices | |||
| YOY % | YOY % | |||
| (04/23/08) | (04/25/07) | Difference | ||
| Russia | 13.30% | 7.40% | 5.90% | |
| Brazil | 4.70% | 3.00% | 1.70% | |
| Source: Bloomberg | ||||
| Fund Name | Ticker | TSC Rating | 1 Month Return | 3 Month Return |
| iShares MSCI Canada | EWC | A | -7.01 | -6.41 |
| Eaton Vance Greater India | EMGIX | C | -10.87 | -28.1 |
| India Fund | IFN | C+ | -9.27 | -26.05 |
| Morgan Stanley India Inv Fund | IIF | C | -10.66 | -29.16 |
| WisdomTree India Earnings Fund | EPI | N/A | -6.55 | N/A |
| iPath MSCI India Index ETN | INP | C- | -7.56 | -30.7 |
| DFA United Kingdom Small Co | DFUKX | C+ | -0.41 | -5.83 |
| Source: Bloomberg | ||||
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