Here is our take on the articles summarized below: 

One recurrent theme of the coronavirus pandemic is its tendency to expose the subsurface workings of our world. For this week’s summaries, we examine several of these undercurrents and the ways the pandemic has brought them to light. First, commodities demand is expected to increase as the pandemic accelerated demand for clean energy, laying the groundwork for long-term growth in the commodities needed to build renewable technology. Our second article examines some of the themes the virus has brought to the world’s attention, while the third demonstrates the need for a more unified and coherent response to future health crises. Our fourth and fifth articles turn to the markets, exploring how the pandemic shocked a relatively healthy market into a recession and what the implications are now that a recovery seems to be nearing. This seems to have sparked a rise in bond yields as investors anticipate additional growth. With so much happening, it is important to stay level-headed in a rapidly-shifting world.

JPMorgan Says Commodities May Have Just Begun a New Supercycle

Gerson Freitas Jr., Bloomberg

Read the full article here

JPMorgan Chase & Co. believes commodities have begun a new supercycle. In the last several weeks, markets have seen agriculture, metal, and oil prices soar. JPMorgan analysts are expecting a long-term boom in commodities for the next few years. They also believe the jump in prices is an “unintended consequence” of the renewed fight against climate change. As countries aim for net-zero carbon emissions, there will be a strain on oil supplies but an increased demand for metals which are needed to build renewable energy infrastructure, batteries, and electric vehicles. While the last commodities supercycle in 2008 was attributed to China’s economic rise, JPMorgan is crediting this supercycle to the post-pandemic recovery, “ultra-loose” fiscal and monetary policy, a weak US dollar, stronger inflation, and more aggressive environmental policies. As government stimulus flows through markets and Covid-19 vaccines are deployed around the world, banks and traders are calling for a commodities bull market. 

Reflections on a Plague Year

Jim O’Neil, Project Syndicate

Read the full article here

While we cannot be aware of all the pandemic’s long-term consequences, we can begin drawing some conclusions, given the world’s current handling of the crisis. The author of this article offers up eight observations: First, an aggressive strategy to stamp out the virus has proven to be the most effective so far. China, Australia, as well as several other Asia-Pacific countries, took the most aggressive steps at the onset of the virus and are now, a year later, in a much stronger position than the West. Second, initial evidence suggests the Covid-19 vaccines in circulation are reducing both the scale of serious illness and transmission, but if governments lift lockdowns and social distancing measures too soon, vaccine-resistant mutations could dampen efforts. Third, the experience of this pandemic may improve the vaccine development process and boost the pharmaceutical sector’s overall efficiency and productivity. Fourth, governments have discovered they can spend a lot more money without upsetting markets than previously thought (though the long-term consequences are not yet known), which could dramatically change the policy landscape. Fifth, work habits may continue to become more flexible leading to positive consequences including less time wasted commuting, more “liquid” labor markets, and maybe even a rise in productivity. This leads us to the observation that urban real estate will need to adapt, requiring new ideas about the relationship between offices, shops, and homes. Seventh, the pandemic has accelerated the shift towards technologically enhanced tools, particularly for consumers, which threatens the existence of brick-and-mortar retailers. Finally, Covid-19 has accelerated Asia’s global rise in terms of relative economic growth. The starkly different governance structures of China and Western democracies could become an even bigger issue than it already is. 

On the Post-Pandemic Horizon, Could That Be… a Boom?

Ben Casselman, New York Times

Read the full article here

Despite an economy mired in the ongoing suppression of the pandemic, there remains a good deal of optimism about a post-Covid boom.  While economists expected a period of strong growth to follow the lockdowns, there are now talks of a rebound surpassing modern precedent. This outlook is informed by a number of factors: declining case counts, increasing vaccinations, federal aid, and a mountain of savings due to a period of decreased spending all support the growth thesis, but predicting the future is never a straightforward task. If the coronavirus crisis has taught us one thing, it is how often we are wrong. A mutation, political division, and carry-on safety concerns are all potential stumbling blocks to a strong recovery.  Similarly, should the wave of pent-up demand overheat the economy, runaway inflation could force the Fed to pump the brakes on the economy. Furthermore, the pandemic has compounded economic inequality, which could take a further beating from a one-sided recovery. Still, the pandemic did little to the roots of the economic tree, and indeed may have pruned some of its branches to leave behind a more productive workforce as the unique demands of the pandemic prompted swift adoption of new technologies and operational streamlining. Given that this recession occurred in an otherwise healthy environment (compare with 2001’s equity bubble or 2008’s toxic asset pools), it is entirely possible that the economy will pick up where it left off.  Policymakers have made extensive efforts to ensure that the damage done by the pandemic is no deeper than surface-level, though it is nevertheless painful for millions of families as unemployment, business closures, and hunger have ballooned. Despite this, entrepreneurship rates have soared, indicating Main Street optimism is alive and has access to capital.  If the boom materializes as hoped, it will not heal all the wounds inflicted by the pandemic, but it may begin the road to recovery.

Bond Selloff Prompts Stock Investors to Confront Rising Rates

Sam Goldfarb, Wall Street Journal

Read the full article here

Bond yields have gone for a ride in the past week as investors’ expectations of a strong recovery have pushed 10-year Treasury note yields up 16% in five days.  The S&P fell 0.7% that same week, with technology stocks (which are seen as vulnerable to rising yields) taking a hit while banks benefitted from bullish projections for lending activity. The move has put some analysts on edge due to its lack of an apparent source, opening the door of potentiality to a swifter and more unpredictable drop in bond prices than expected. This would have disruptive effects on equities as higher yields translate to higher borrowing costs for companies, cutting into earnings. Given that the yield on 10-year Treasuries is often used as the discount rate in present-value calculations, rising yields result in lower valuations which may create selling pressures in the markets as investors move to less risky assets.  In a market environment of historically high valuations, many investors are re-evaluating their sector allocations to account for the prospects of a recovery and the ensuing rise in interest rates. As the markets transition into “recovery thinking,” the implications of a rebound have shaken up the landscape of a post-pandemic economy.