Rise Above Rates

Rising Rates and Commodities

Unlike previous tightening cycles, we don't expect to see commodity prices go up if and when rates rise.

Portfolio manager Nicholas Johnson discusses how this rising rate cycle is different from ones in the past and what that may mean for commodities.

Economic and market conditions are very different now than during past rate hikes, leading PIMCO to conclude that that commodity prices are not likely to rise with rates.

  • The Fed is raising rates to normalize policy, not slow growth and inflation, so the policy change will have less of an impact on commodities.
  • Commodities are experiencing low demand and excess supply, making it unlikely we will see prices increase
  • While the U.S. is raising rates other central banks are still easing. These divergent policies mean rate increases will likely strengthen the dollar, creating a headwind for commodities.
  • Anticipation of rising rates has ignited a slow liquidation of gold, but if rates increase more or faster than expected it could exacerbate the selloff and cause a sizable move down in prices.

More from PIMCO on Rates

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Rising Rates and Bonds

A short video offering basic education on what the fed funds rate is and how changes in the rate may impact bond investments.

PIMCO’s Outlook for Rates

Even amid a tighter policy environment, interest rates should remain historically low in the years ahead.

Rising Rates: Dispelling the Myth

A reasoned analysis that takes into account historical interest rates, the likely path of rates going forward and the impact of past interest rate rises on returns suggests that rising rates may not be such a threat to bond investors.

The Benefits of Active Management When Rates Are Rising

After nearly seven years of a near zero federal funds rate, investors are concerned about an eventual Fed rate hike and investing in the current environment. We discussed rising rates and the benefits of active management with PIMCO managing director Jim Moore.

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