Uncertainty and fear of higher-than-expected inflation have been on investors’ minds for the past few weeks. Last week it was announced that the Consumer Price Index (CPI) rose more than 5% year over year, amounting to its biggest increase since 2008. Stocks in the U.S. did not respond in line with CPI figures however, considering last year’s levels were highly disrupted by the pandemic. Instead, the S&P 500 Index reached all time high record levels last Thursday. The Federal Reserve’s views on inflation remain that the current levels are transitory and a byproduct of the reactivation of the economy from the Covid-19 pandemic.
S&P 500 Index (SPX Index)
After a rapid rise from February to March, the yield on the 10-year Treasury has started to fall amid investor sentiment on the Fed’s view of inflation pressure. Yields have been sliding in June and fell under 1.5% on last week.
US 10-year Treasury Bond (UAGG10YR Index)
Tomorrow, investors await Jerome Powell’s comments in relation to the Federal Open Market Committee meeting (FOMC). Any hint of monetary intervention to control the surge in prices could impact commodities going forward. Additionally, the FT Commodities Global Summit conference in Australia will provide important information on the outlook in the near term. Furthermore, China will be sharing its commodity production snapshot. As a reminder, the Chinese government has been trying to slow down commodity prices to protect manufacturers whose margins may be impacted by rising prices. Increased supply in various commodities could help China with its objective.
Bloomberg Commodity Index (BCOM Index)
The Bloomberg Commodity Index reached levels last seen in 2015 as investors await what could be the beginning of a new commodity super cycle. The U.S. Department of agriculture estimates offered some relief of worries for grain supplies last Thursday, taking corn, soybeans, and wheat lower on Friday.