With the immediate GameStop shenanigans appearing over for now, markets returned to something more akin to business as usual.
Although something of a destabilising narrative over the last two weeks S&P has made strong gains of 5.35% finishing last week at yet another all time high. The dollar fell, that the threatened bounce may not materialise.
The most notable move has been yields on the U.S. 10 year which have risen nearly 13.5% in the last two weeks – now at their highest in a year. The recent U.S job numbers were poor and further re-enforced the need of ongoing stimulus, and a sign that investors expect it to eventually lead to higher inflation.
With commodities being seen as an inflation hedge it’s not surprising many are claiming we’re in the first throes of a new commodity bull market. JPMorgan analysts led by Marko Kolanovic noted in a recent report that “Commodities appear to have begun a new supercycle of years-long gains”.
Gold being inversely correlated to yields has seen further breakdown. Any sustained rise in yields would cripple the economy and are unlikely to be tolerated though, so any short term weakness in gold could prove something of a gift for longer-term investors.
Oil strength
WTI crude has risen over 14% in the last few weeks and sits just shy of $60. Whenever it looks likely to consolidate it’s just keeps rising.
A natural assumption is that Biden’s green energy drive will be bearish for oil. In the long term that may well be true, but could have quite the opposite effect in the shorter term as the reduction in subsides further reduces investment and removes supply from the market just at the time that demand is accelerating – making it very likely that prices of both battery metals and oil both appreciate in coming months.