The commodity rally is in full swing, with the Bloomberg Commodity Index recording a new rise this week and is now at its highest level since 2015.

The sharp rise in economic activity, the supply chain problems and the estimated long duration of high growth rates have sharply increased demand with the result that in addition to the above reasons there are now very serious shortages as production is specified.

In particular, copper and iron ore prices hit new highs last week as demand from China soared after the comeback from a three-day holiday.

The rise of commodities is broad. The restart of the world economy and especially of the big industrialized countries, has caused an upward shock in the prices of all commodities with new records every day. The rapid rise in prices of commodities and raw materials has led to increased fears of rising inflation and this is causing chain reactions across the market spectrum.

Bonds, for which the first quarter of 2021 was one of the worst in their history, are more sensitive to this development, as they have already analyzed. This situation has also alerted the Fed as many believe that it should de-escalate bond markets in order not to add to inflationary pressures. Even if the Fed temporarily cut down bond purchases, it does not appear to be changing its zero-interest policy.

With the commodities being at a possible start of a new cycle, the current rally still seems to have a way to go. This is also claimed by most investment banks, which are seeing new higher levels. Copper is expected to continue to move at higher levels as it also benefits from the huge demand that exists in new energy sectors.

According to Commerzbank, the long- term outlook for metals is particularly positive as the trend towards "green" energy, which means switching to electric cars, wind and solar energy, will keep demand very high.

As China is a major player in commodities (both producer and consumer) and as prices have quickly risen to high levels, the fear of a correction is not what seems to be troubling investors, but a possible intervention by the Chinese authorities, which would make things get out of control easily.

Prices play a vital role for metal producers (mining) and are the ones that significantly determine supply. Given that even at current prices many companies are not profitable and therefore will not be involved in production, it would be normal to expect higher prices that will activate more companies and there will be more supply. According to sector’s giant Glencore, this could happen when copper’s price hits $ 15,000, which is 50% higher than current levels.

Value stocks: Leading the capital inflows

In the last year, value stocks have performed better than Growth stocks and everything shows that this trend has now found the right macroeconomic background to fully unfold.

The outbreak of the pandemic has helped technological companies record deafening growth in their sales as the services they provided became essential for everyone. However, the sharp rise in their valuations combined with the change in macroeconomic conditions and the corresponding devaluation of value companies, led investors to recognize the great prospects hidden in the companies associated with the return to normalcy.

The Value sector is at the cheapest levels since 1999-2000. Fundamental but also cyclical factors seem to be able to support the further rise of value shares. This means that in the coming years the average annual return on value stocks could be higher than that of growth stocks.