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Investors didn't bat an eyelid after the US Federal Reserve left interest rates and bond purchases unchanged following its meeting last week, as it had been a foregone conclusion. However, the market was all ears about what chairman Jerome Powell had to say after the meeting.
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Powell said the rise in inflation was driven by temporary factors, including the recovery of the economy, which had put upward pressure on prices, but the one-off price increases was unlikely to lead to sustained inflation.
He also reiterated that now was not the time for the Fed to talk about tapering because employment and inflation were still not close to the Fed's targets.
As I mentioned last week, commodity prices are now in an awkward level, while it is uncertain as to whether inflation will continue to rise, just like Powell said.
Most central bankers are as uncertain as Powell with regards to inflation, so the world's central banks will continue with quantitative easing and financial market liquidity will also be maintained.
This should also support commodity prices, so the chance of another 50 percent rise in the CRB Index remains high.
In fact, central bankers are wary about monetary tightening mainly because when the Fed decided to reduce its debt in 2015, it caused significant turbulence across financial markets, while the American and global economy also gradually lost steam.
The Fed eventually loosened monetary policy before the outbreak of the novel coronavirus in January 2019 and then had to launch the largest-ever quantitative easing program in history after the pandemic struck.
Wiser from their experiences of 2015, central bankers are now on guard against tightening of monetary policies because they now understand that the driving force for economic and financial markets comes from countries constantly raising money, and without this the entire global economy as well as financial markets will lose its momentum and there will be an economic and financial crisis.
Therefore, global investment products will not lose support and fall sharply in the short term and investors only need to keep an eye on which markets are pulling in funds for a longer time.
So while the commodity market is still relatively lagging behind, its rise is inevitable, even if global inflation rises without central bank monetary tightening, and it is believed that many investors have also been deploying funds in preparation for a bull run in commodities.
The only thing we need to consider is whether investors will completely give up on cryptocoins and switch to commodities.
However, cryptocurrencies have been on the rise again over the past week, though its leader - bitcoin - is still 10 percent off its record high. This reflects that cryptocurrencies have lost the momentum they enjoyed in the first quarter.
So, I still hold on to my views of the past month - that commodities will be the best investment choice for the next six months. The chances of Brent oil breaking US$80 this year are very good and industrial metals are also commodities worthy of our attention.
Andrew Wong is chairman and CEO of Anli Securities
