Asset Allocation Weekly

Confluence Investment Management offers various asset allocation products which are managed using “top down,” or macro, analysis. We publish asset allocation thoughts on a weekly basis in a special section within our Daily Comment report, updating the piece every Friday.

Asset Allocation Weekly (June 16, 2017)

by Asset Allocation Committee Last week, the Federal Reserve published its Financial Accounts of the United States report, more commonly called the “Flow of Funds” data.  The report offers a plethora of insights into the economy.  This week we want to examine the household debt situation. In Q1, household debt reached $15.1 trillion, up 3.4% from… Read More »

Asset Allocation Weekly (June 9, 2017)

by Asset Allocation Committee We have been monitoring the S&P 500 performance relative to new GOP administrations.  Based on the historical pattern, the market has reached the average peak level a few weeks early. This chart shows the performance of the S&P 500 on a weekly close basis, indexed to the first Friday of the first… Read More »

Asset Allocation Weekly (June 2, 2017)

by Asset Allocation Committee In the last FOMC minutes, policymakers signaled another hike at the upcoming June 14th meeting.  We continue to closely monitor financial conditions but, so far, financial markets are rather sanguine about the impact of policy tightening. The blue line on the chart shows the Chicago FRB Financial Conditions Index, which measures the… Read More »

Asset Allocation Weekly (May 26, 2017)

by Asset Allocation Committee The dollar is in its third major bull market since currencies began floating in 1971. This chart shows the JPM dollar index which adjusts for relative inflation and trade.  The previous two bull markets exhibited greater strength than the current one.  Because of the dollar’s reserve currency role, there will always be… Read More »

Asset Allocation Weekly (May 19, 2017)

by Asset Allocation Committee One of the significant “known/unknowns” is the true condition of the labor market.  The below chart highlights the issue. The blue line is the unemployment rate, while the red line is the employment/population ratio (scale inverted).  From 1980 until 2010, these two series closely tracked each other.  During the period since the… Read More »

Asset Allocation Weekly (May 12, 2017)

by Asset Allocation Committee Slow economic growth has plagued the West.  Although the concern has been acute since the Great Financial Crisis (GFC), worries about slowing growth predated that event.  Perhaps the most important factor contributing to sluggish growth has been tepid productivity growth. This chart shows the five-year change in productivity; we use this longer… Read More »

Asset Allocation Weekly (May 5, 2017)

by Asset Allocation Committee In our most recent quarterly asset allocation meetings, our analysis determined that emerging markets would not be added to the portfolios.  Since this asset class has been this year’s best performer, some explanation is in order.  One of the primary reasons we have refrained from adding emerging markets is the dollar’s strength.… Read More »

Asset Allocation Weekly (April 28, 2017)

by Asset Allocation Committee Last week, we discussed the impact of reducing the size of the Federal Reserve’s balance sheet on stocks and bonds.  This week we will discuss the effects of QE on monetary policy. The FOMC dropped rates to near zero by January 2009.  Although European central banks (including the ECB) have since taken… Read More »

Asset Allocation Weekly (April 21, 2017)

by Asset Allocation Committee Last week, we discussed the impact of reducing the size of the Federal Reserve’s balance sheet on the economy.  This week we will discuss the effects of QE on financial markets. The relationship between the balance sheet and equities seems rather straightforward; expanding the balance sheet appears to be clearly supportive for… Read More »

Asset Allocation Weekly (April 13, 2017)

by Asset Allocation Committee The most recent Federal Reserve minutes indicated that the U.S. central bank is preparing to reverse its experiment with quantitative easing (QE) by reducing the size of its balance sheet.  Although the eventual desire to reduce the size of the balance sheet is no real surprise, the timing was unclear.  It now… Read More »

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