Envestnet | PMC provides independent advisors, broker-dealers, and institutional investors with comprehensive manager research, portfolio consulting, and portfolio management to help improve client outcomes. Every month our Global Macro Team offers insights into the themes currently shaping the markets to help you quickly take note of recent trends that your clients may be inquiring about.

Soaring Commodity Prices

The pandemic has wreaked havoc on balancing the supply and demand of key commodities. Lumber has skyrocketed 232 percent since the onset of the pandemic, cobalt has jumped roughly 40 percent year-to-date, and copper hit a 10-year high during the month of April.1, 2, 3

But it seems that other systemic forces are also at play. New housing builds are at their highest level since 2006, and builders are willing to pay a premium in order to complete contracts.1 Copper is used to produce everything from household appliances to wind turbines and, along with cobalt, is a key ingredient in electric vehicle batteries.2, 3 Prompted by a new wave of green demand and post-pandemic recovery, controlling the price of input commodities will be critical for meeting future economic goals.

Federal Debt Levels

U.S. federal debt is at an all-time high and is expected to increase with further government expenditures, pushing the debt-to-Gross Domestic Product (GDP) ratio to levels not seen since World War II.4

The debt-to-GDP ratio is an often-sighted measure of financial risk for a country, but it’s difficult to know the specific debt-to-GDP level that may trigger a crisis. Given the global demand for U.S. Treasury securities, a high debt-to-GDP ratio may not be the same cause for concern as in the past. An alternative measure of solvency risk is comparing the county’s interest expense to its GDP, arguing that if GDP grows at a faster rate than the interest payments, then the country has the ability to take on more debt.4 Regardless of how it’s evaluated, debt levels are on our radar.

SPAC Scrutiny

SPACs have become a hot-ticket item in recent years, but increased regulation has tempered expectations and demand. With the promise of “democratizing” initial public offerings, SPACs raised a record amount of capital in 2020.5 Continued demand this year has been strong, raising nearly $100 billion so far, but in recent weeks there has been a precipitous drop in both investments and the number of SPACs going to market.5

Regulators have recently brought up several concerns regarding the unusual structure and accounting practices of SPACs. Ultimately, these concerns will need to be assuaged for SPACs to have another meteoric rise.

Factors Reverse

Leading up to November 2020, when news of promising vaccinations broke, growth companies had dominated over value companies for over a decade. The momentum factor was also at play, and what had been working kept working. Since November 2020, there has been a dramatic rotation to value, rewarding more cyclical areas of the market. The momentum and value factors typically work in reverse and are rarely correlated, but as hot money chases these now-loved value stocks, it looks like momentum is shifting.6

Inflation Fears Heat Up

Headline inflation numbers jumped in March, showing the biggest increase since November 2009. While gas prices were the biggest driver for the gains, the service sector has started to rebound as vaccinated consumers have come out of hibernation and are spending on hotels and restaurants at a much greater pace.7

The Federal Reserve has set a target of 2 percent for inflation before they will act to cool the economy, although they anticipate that number will be exceeded temporarily as supply and demand normalize.7 Given the amount of government funds expected to further stimulate the markets, there is some fear a rise in inflation might not be temporary.

Learn more about current inflation-related expectations on the PMC website.

If you’d like additional information about these trends or have questions, please contact PMC.Research@envestnet.com.


  1. Lance Lambert, “Lumber prices are up 232% and ‘could’ spiral out of control in the next few months’,” last modified on April 27, 2021, https://fortune.com/2021/04/27/lumber-prices-are-up-232-and-it-could-spiral-out-of-control-in-the-next-few-months/.
  2. “Cobalt price jump underscores reliance on metal for electric vehicle batteries,” FinancialTimes.com, last accessed on May 7, 2021, https://www.ft.com/content/c337958a-3f1b-41c5-b229-11556baa4164.
  3. “Copper hits 10-year high above $10,000 a tonne,” FinancialTimes.com, last accessed on May 7, 2021, https://www.ft.com/content/bbd0adc1-442d-4662-bf13-9a641807b378.
  4. Jo Craven McGinty, “U.S. Debt Is at a Record, but the Risk Calculus Is Changing,” WSJ.com, last modified on April 16, 2021, https://www.wsj.com/articles/u-s-debt-is-at-a-record-high-but-the-risk-calculus-is-changing-11618565580.
  5. Dave Michaels, Amrith Ramkumar, and Alexander Osipovich, “SPAC Hot Streak Put on Ice by Regulatory Warnings,” WSJ.com, last modified on April 16, 2021, https://www.wsj.com/articles/spac-hot-streak-put-on-ice-by-regulatory-warnings-11618565403.
  6. Robin Wigglesworth, Madison Darbyshire, and Laurence Fletcher, “Investors brace for ‘major shift’ as momentum and value collide,” FinancialTimes.com, last modified on April 14, 2021, https://www.ft.com/content/979714e5-f93b-4a4c-a445-8b2e8ccef80c.
  7. “America’s inflation spike begins,” Economist.com, last modified on April 13, 2021, https://www.economist.com/finance-and-economics/2021/04/13/americas-inflation-spike-begins.

The information, analysis and opinions expressed herein are for informational purposes only and do not necessarily reflect the views of Envestnet. These views reflect the judgment of the author as of the date of writing and are subject to change at any time without notice. Nothing contained in this piece is intended to constitute legal, tax, accounting, securities, or investment advice, nor an opinion regarding the appropriateness of any investment, nor a solicitation of any type. Past performance is not indicative of future results.

PMC Global Macro Team

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