Stay ahead of inflation

Inflation may be stabilising after two difficult years, but its potential to squeeze household budgets has not gone away. The United SGD Fund helps to ensure you remain one step ahead.

Inflation can erode lifestyles

In a small and export-dependent economy like Singapore’s, inflation can rise quickly and have painful consequences. In 2023, Singapore’s all-item inflation reached 4.8 percent¹. While Fixed Deposit rates also increased, this was not enough to counter the effects of such high inflation.

A survey² of the impact on Singaporean households conducted at the time tells a cautionary tale:

^{Source: Rakuten Insight}

It would appear that over a third of Singapore households were hit hard by the 2023 inflation, with many feeling the pinch with regards everyday necessities such as food, clothing and healthcare.

Beware, inflation risks remain

Today, inflation appears to have peaked and is on its way down. The most recent Monetary Authority of Singapore (MAS) report tells us that all-item inflation will likely average 2.5 percent in 2024, and is forecast to fall to around 2.0 percent in 2025³.

But this does not tell the full story. Here’s why:

#1. Official inflation numbers are only broad averages. On the ground, inflation is not felt equally across all households. For example, compared to September last year, food prices are up by 2.6 percent, housing and utilities up 3.2 percent and healthcare up 4.1 percent⁴. So a household’s actual inflation rate can be very different depending on spending patterns.

#2 A household’s wage growth, and therefore its ability to cope with inflation, can also vary widely. According to the Ministry of Manpower, average wages in 2023 grew by 5.2 before taking inflation into account, and 0.4 percent after accounting for inflation⁵. However, they noted differences across employee types. For example on average, Junior Management employee wages grew by 6.3 percent, whereas Senior Management employee wages only increased 4.6 percent⁵, that is, below the inflation rate at the time. Depending on your specific role and company, your wage growth may not be keeping pace with inflation.

#3 There are many factors that could derail next year’s inflation forecasts. We believe that there is potential for upward pressure on inflation arising from deeper geo-political uncertainties, the effects of climate change, and Trump’s promised tariffs. As such, Singaporeans should remain cautious of the potential for inflation to stay higher for longer.

The United SGD Fund helps investors achieve real returns

The United SGD Fund, launched 26 years ago, offers a way for investors to navigate inflation by providing both steady income and a potential for capital appreciation.

The Fund focuses on high-quality corporate bonds with staggered maturities of around 1 – 3 years. This allows the fund to lock in yields as interest rates start to ease.

Furthermore, in today’s environment of positive growth, moderating inflation and falling interest rates, the Fund benefits because corporate bonds tend to perform better than government bonds. As a result, over the last year, the Fund returned 5.03 percent⁶, well ahead of inflation and fixed deposit rates.

The above conditions are expected to last into 2025 as Singapore interest rates continue to decline, growth stays resilient but inflation remains relatively sticky.

Find out more about the United SGD Fund here.

Fund details

^{1 Macrotrends, Singapore Inflation Rate 1961-2024, November 2024
2 Rakuten Insight, May 2023
3 Monetary Authority of Singapore, MAS Monetary Policy Statement – October 2024, October 2024
4 Trading Economics, Singapore Inflation Rate, October 2024
5 Ministry of Manpower, June 2024
6 Morningstar, United SGD Fund – Class A SGD Dist as of 31 October 2024
7 Morningstar, October 2024
8 Investors should refer to the Fund's prospectus for more details on the different classes available.
9 Please check with the distributor or refer to the Fund's prospectus for more details.}