Financial Markets & Economies Week 7
You have heard the word inflation countless times by now. The decrease of purchasing power due to increase in general price levels. The current low interest rate environment according to many is likely to spur inflation as economies reopen and we head back to some sort of normalcy. According to Investopedia, signs of inflation are seen in the farmland where prices of corn and soybean increased to levels not seen in years. Crude, platinum, and copper were also among the commodities surging this past week as economies recover.
According to a Bank of America analyst, these surges are due to a strong demand for goods and a stronger Chinese economy. The stimuli are working their way into consumption. Although people are still not spending much on travel, hotel and entertainment they are increasingly buying/ ordering goods. Many of the goods we buy are made in China, the biggest buyer of commodities, said the analyst. This explains the recent commodities surge. China has such high exports at the moment that they are facing container shortages.
This commodity recovery is just the beginning of a long-term commodity bull market according to JP Morgan. According to FX Empire the bull market will be driven by the pandemic recovery, massive stimulus spending, rising inflation, China growth, more aggressive environmental policies and a weakening US dollar.