A surge in prices for the raw materials that power manufacturing & manufacturing shows investors are betting on a prolong expansion -- and a potential rebound in inflation.
An index of global commodities prices, the SP GSCI, has advanced 11% this year, outpacing the SP 500 index's 9.2% climb. Copper and oil have gained more than 10% and 16% respectively. Even gold is posting fresh new records, rising of 14% to a new high of $2350 a troy once.
The rally is rooted in expectation that economic growth will increase demand from China and US. A pair of reports last week showing recoveries from both countries' manufacturing sector helped spark a new wave of buying. That extended an upswing that has boosted shares of energy and materials companies while threatening to lift the px of gasoline just ahead of summer of driving season.
Real income has sparked a reacceleration in global goods demand that is likely to propel commodity prices even higher. That could complicate the Federal Reserve's inflation fight when investors beginning to doubt if the central bank can trim the i/r later in the year