Global Inflation Beta

It is a familiar concept that commodities have provided inflation protection as discussed in a recent post about a discussion I had with Bluford Putnam, Managing Director and Chief Economist, of our partner, CME Group, to discuss why inflation is likely to appear this year. I have also discussed how much inflation protection has been provided in a special video on commodities and inflation from our Index Matters Series with Bob Greer of PIMCO and Boris Shrayer (formerly) from Morgan Stanley. Inflation and commodities generally move together as shown in the chart below: Source: S&P Dow Jones Indices and/or its affiliates and Data from Jan 2004 to Dec 2013.  Past performance is not an indication of future results. This chart reflects hypothetical historical performance. Please see the Performance Disclosure at the end of this document for more information regarding the inherent limitations associated with backtested performance. However, in light of the inflation announcement from Feb 20, 2014 that stated US inflation ticked up in January 2014, I have received some questions from investors around the world regarding whether the commodity indices protect them from local inflation.  The answer is that it depends but for most of the countries in the table below, the answer is yes.  As I have explained inflation beta in prior posts, the results can be interpreted as, “if there was a 1% change in CPI, then there was an x% change in the index”. In the table below, the country CPI is compared to both a global flagship, the S&P GSCI, and an international flagship the S&P WCI.  Notice generally the inflation beta is higher from the international benchmark, the S&P WCI.  Also notice for some countries like South Africa and Mexico, there may not be the local inflation protection one might get from other countries. This is not completely surprising given that some countries have local price controls despite the global nature of commodities, discussed in this post including discussions with the CME Group, ICE and NYSE-LIFFE.

Read full post  at



The Association of International Wealth Management of India (AIWMI) is a not-for-profit organization and a globally recognized membership association for finance professionals. AIWMI primarily focuses on the broad and strategic role of developing a more robust and forward-looking training infrastructure for the financial services sector and to promote more active industry involvement and collaboration in training and continuing education. AIWMI is offering advanced international certification programs along with a wide variety of high-quality executive education programs. AIWMI programs combine state-of-the-art knowledge and skills with practical experience and insights into the functioning of the financial sector. All AIWMI courses and educational events have an intense and pragmatic curriculum. Participants are exposed to the latest developments within the financial services sector. AIWMI plays a key role in guiding the development of the financial services sector. AIWMI works with key industry participants’ viz. the Government, the Regulators, the Industries/Associations, the Corporate, the Media and the General Public to achieve its objectives. Besides enhancing technical competence and professionalism in the industry, AIWMI organizes events and facilitates discussions to promote best practices in leadership and talent development in the financial sector with an aim to become Asia’s premier center of excellence for financial education.

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )


Connecting to %s