Since the markets reached the moment of greatest panic in the first quarter of last year, when the health crisis due to Covid-19 was at its worst in Spain and the uncertainty was enormous, the price of raw materials has not done more to climb.
The cocktail that has created the development of several vaccines, which are being effective in greatly reducing the mortality of the virus, together with the stimulus plans that the great central banks of the planet and also the governments of the largest economies have designed, has been a injection of energy for the price of basic resources.
Some have also experienced upward pressure from supply, and not just from demand, with production disruptions that have exacerbated the deficit and accelerated price increases.
When one looks at the table of the main raw materials that are traded on the market, those that have not risen in price in the last 12 months are the exception, something that also happens if one looks at the behavior they have had since the beginning of 2021.
This week, however, has started with a major scare for the bulls: Commodities plummeted on Monday, with sharp falls generated by fears of contagion from the Delta strain of the coronavirus. Oil, for example, started the week with losses of 6.75 on Monday; falls in the price of metals such as copper or tin were 2.8% and 0.8%, respectively.
Recovery after the fall
However, after that initial scare , investors seem to have calmed down, and advances have been generalized in this type of assets , until the losses that occurred on Monday were erased, leaving a positive balance for the whole week.
The Bloomberg Commodity Index , which weights the main commodities on the market (gold, natural gas, oil, corn and copper are the basic resources that weigh the most in this basket), has once again reached highs for the year, at 95.7 points, a level that has not been touched since 2015. The rise that the index accumulates so far this year is 22.4%, one of the reasons that explain the rebound that the index is experiencing. inflation in recent months, both in Europe and the United States.
“Looking ahead, the Delta variant of the Coronavirus is unlikely to end the recovery of global growth, in our view, despite the fact that it may generate specific scares on a regional basis. It is possible that it will somehow slow down the demand dynamics of raw materials in specific places, but it is unlikely that it will generate a considerable damage in the levels of demand “, stand out from the Swiss bank Julius Baer.
Thus, it seems that the rapid recovery that has taken place in the price of these assets would be supported, at least by the part of the demand. However, Julius Baer shares his view that the price of raw materials, especially industrial metals, now appears to be in line with their fundamentals.
“This latest sale seems to be aligned with the fundamentals, and is not so much a buying opportunity. Especially in the case of industrial metals, which have run a lot for a while due to the high expectations that are placed on decarbonization,” they explain.
The ‘supercycle’ will continue
This opinion of the Swiss bank does not seem to be the majority among investors. According to a survey published during the second week of July, in which the CloseCross platform asked a group of them who together manage 380,000 million dollars, 81% consider that the markets are entering a new bullish super-cycle of raw materials , a period of generalized increases for these assets that will last in the longer term, for several decades. Firms like JP Morgan and Goldman Sachs warned months ago of this possibility.
The main cause behind this possible new super cycle that the investors surveyed argue is the stimulus that the different world governments are injecting to try to give a boost to the recovery of economic growth.
The rising cost of raw materials is having an impact on the silent tax that inflation implies for citizens. Central banks, both the US Federal Reserve (Fed) and the European Central Bank (ECB), are warning that the inflationary spikes will be temporary, and that the situation will return to normal in the coming months, but there are many analysts who believe that, in the next few years, the rates are going to be well above what we have seen in the last decade.
This is the case, for example, of Schroders. The British manager acknowledges that the rise in inflation may only be temporary in the medium term, as “the demand that comes with the recovery can be absorbed by the economy without causing another round of price increases as a result of higher wages. “.
However, later, for 2022 and 2023, they consider that “inflation could rise again, after the full reopening of the services sector and the increase in people returning to work,” they point out.
In his view, “headline inflation will approach 3% again in the next two or three years. Inflation could continue to rise in 2023 and beyond, unless steps are taken to cool the growing demand after the recovery from the pandemic. This means that central banks will have to consider firmer policies, “they explain.
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