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Markets in a Minute
Brought to you by New York Life Investments

Consensus thinking in markets has become increasingly focused on, and troubled
by, the outlook for U.S. and global economic growth this summer. In particular,
economic data has been disappointing, money supply growth has slowed, a Fed
tapering announcement is looming, and the delta variant continues to spread.
Those concerns are borne out by the recent BofAML survey results and are largely
reflected in major asset prices. The dollar, for example, has rallied; the 10
year Treasury yield has fallen; commodity prices have come under pressure; while
the cyclical parts of the U.S./global equity market have tracked sideways (e.g.
the Russell 2000) or down (e.g. the Japanese Nikkei 225). The key question for
markets, therefore, is: Will growth concerns intensify? Or is recent weakness
merely a soft patch which is about to reverse with U.S./global momentum poised
to reaccelerate?


In our view it’s likely to be the latter, for a number of reasons. In
particular, inventory levels are low in the U.S. and global economy. That’s
clear, for example, in cyclical parts of the U.S. economy, like in autos and
housing, and at the ‘top level’ given the prolonged contraction in GDP
inventories over the past 5 quarters (see chart). As such, and as inventories
are re-stocked over coming months and quarters, industrial production and
economic activity more generally should reaccelerate. There’s a growing
likelihood, therefore, that consensus thinking in markets is currently
wrongfooted. If correct, then there’s plenty of fuel for a change in trend in
certain key asset prices.


U.S. GDP inventories suggest that growth momentum is poised to reaccelerate



Sources: Longview Economics, Macrobond, 08/24/21. Past performance is no
guarantee of future results.

The Russell 2000 Index is stock market index comprised of 2,000
small-capitalization companies.


The Nikkei 225 is the leading and most-respected index of Japanese stocks.


Past performance is no guarantee of future results. It is not possible to invest
directly in an index.


Longview Economics is not affiliated with New York Life Insurance Company or its
subsidiaries.


This material represents an assessment of the market environment as of a
specific date; is subject to change; and is not intended to be a forecast of
future events or a guarantee of future results. This information should not be
relied upon by the reader as research or investment advice regarding the funds
or any particular issuer/security.


This material contains general information only and does not take into account
an individual’s financial circumstances. This information should not be relied
upon as a primary basis for an investment decision. Rather, an assessment should
be made as to whether the information is appropriate in individual circumstances
and consideration should be given to talking to a financial advisor before
making an investment decision.


“New York Life Investments” is both a service mark, and the common trade name,
of certain investment advisors affiliated with New York Life Insurance Company.


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