With US Manufacturing Prices and Activity….

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… remaining at exceptionally elevated levels the macro backdrop favors the following allocation.

Insight:

When US Institute of Supply Management manufacturing data prints above 56 as well as reported input price pressures print above 70, which is currently the case, Oil prices tended to rally by +6.1% over the subsequent 3 months. An ISM reading of 50 is seen as neutral while a higher reading indicates higher activity. The iShares MSCI Brazil tended to return +3.9%, the equity market in India rallied +3.6% while the US Yield curve (2 year vs. 10 year US Treasuries) tended to flatten. Despite potential margin pressure due to higher input costs for companies, SP500 forward returns were moderately higher.

Story:

With the US economy re-opening, supply shortages remain as demand still outpaces demand.

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