Many countries around the globe continue to face another deadly wave of Covid-19. India, Thailand, Brazil, and others are still struggling as more restrictions are being placed on the population to fight the pandemic. Some European countries are starting to lift restrictions as vaccination numbers are increasing and new cases are beginning to fall. In the U.S., the rapid vaccination rate is boosting optimism in the reopening of the economy.
The S&P 500 Index finished the last week of the month flat yet gained 5.2% in April posting its best month since November. Furthermore, the index passed the 4,200 level for the first time on Thursday. April marked a milestone for the index where 95% of constituent stocks traded over their 200-day moving average for 18 days of the month. The NASDAQ composite also traded at record levels during last week. Despite stocks reaching all-time high levels, the Bloomberg Commodity index is rising from last year’s lows but is still below levels seen in 2015.
Bloomberg Commodity Futures (BCOM 1 Index) – (2011-2021)
As government stimulus continues to boost global economic growth, commodities are in the spotlight as they are outperforming equities.
Lumber (LB) – (One Year)
Corn Futures (C) – (One Year)
Lumber prices have risen more than 80% this year amid demand for home building and repairs. Copper prices are approaching record levels while cars returning to the streets is pushing oil prices up. Grains too have risen sharply making it very expensive to feed cattle. Many of these markets are in backwardation, as their demand is so high, prices for the shortest maturities are higher than longer maturities. Normally, in commodity markets, longer maturity futures are higher than spot or near-term futures because they reflect the cost of carrying inventories.
With inflation intensifying, gaining exposure to commodities may prove to be beneficial to investors as a powerful hedge.