Jae S. Yoon, CFA, is the chief investment officer and a portfolio manager at New York Life Investment Management LLC (NYLIM). Mr. Yoon partners with the portfolio teams at NYLIM’s independent investment boutiques to ensure that investment processes and results align with client expectations. He also oversees NYLIM’s Strategic Asset Allocation and Solutions (SAS) group which manages asset allocation portfolios for retail and institutional clients. Mr. Yoon is a graduate of Cornell University, where he earned a Master’s degree in operations research and a Bachelor’s degree in electrical engineering.

I spoke with Jae on April 27 at the Morningstar Investment Conference.

NYLIM Asset Classes
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What is your role at New York Life Investment Management and what is your strategic focus for the advisory market?

I serve as the Chief Investment Officer of New York Life Investment Management, also known as NYLIM, which oversees approximately $293 billion in assets under management (as of 3/31/17). NYLIM is the global asset management arm of our parent company New York Life. At NYLIM, we offer investors access to independent global investment boutiques with specialties in areas including fixed income, equities, alternatives and liquid alternatives, sustainable and responsible investing (SRI) and asset allocation. In my role as CIO, I chair the NYLIM Investment Governance Committee and maintain oversight of investment processes and results across our organization. Additionally, I oversee the Strategic Asset Allocation and Solutions group which manages over $10 billion in asset allocation portfolios. My team and I also provide macroeconomic market research and insights for New York Life, MainStay Investments and our investors.

I’d like to get your take on valuations in the various asset classes that you follow. But before I do that, I want to get your general take on the global economy and in particular, the risk of recession in the US.

We are in a global economic recovery led by the U.S. It has been a long economic recovery by historical standards but we see little chance of recession this year or next. Fiscal stimulus may extend the length of the recovery this time around.

The recovery underway is producing profit growth. As a result we are neutral-to-positively disposed to risky assets around the world.

Valuations reflect low inflation and an outlook of economic growth but they are uneven. U.S. equities are clearly on the richer side, followed by European equities and the Emerging Markets, which are the cheapest from a valuation perspective, in our view.

Fiscal stimulus is a wild card. From a valuation perspective, the market may have gotten a little ahead of itself. There are differences in the economic backdrop President Reagan encountered versus the one President Trump is operating in. These differences – such as the levels of inflation and unemployment – may not be getting the respect they deserve. Also, everyone expects things to happen faster these days but policy-making is still cumbersome as we’ve recently seen.

Despite these fine points, we believe the efforts underway to stimulate the economy will most likely provide further growth in this expansion but we are still in the later innings of the ballgame. Hopefully, it will go into extra innings.

You wrote about a week ago that the Trump “reflation trade” may have lost some of its momentum, but that was before the market rallied this week following the results of the French primary election. Very few analysts believe that U.S. equities are undervalued or even fairly valued, but of course, most of those analysts have been wrong for the last five years. Where do you see value in U.S. equities?

Equity markets around the world certainly rallied on fading political uncertainty in Europe.

Within U.S. equities, we like commodity and energy-related sectors. We think oil prices will soon stabilize and then re-enter the $50 to $60 per barrel range. We think we will finish up the year around $60. As for risks worth watching, OPEC has some sway in the final outcome and its production requires ongoing monitoring.

Another area we like is technology which may benefit from forthcoming tax reform and an upturn in capital spending now that corporate profits are growing again and CEO confidence is elevated. There are a lot of global linkages, so policies that impact trade, student visas, or the ease of entry for educated foreign citizens are among topics to watch.

Revisiting the Trump “reflation trade,” we do think some version of the administration’s plans on deregulation, tax reform and infrastructure will happen in late 2017 into 2018. But it may be hard to satisfy expectations. Modest corrections are hard to predict but do tend to occur a few times a year.

By Robert Huebscher, read the full article here.