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 (November 17, 2017)

by Asset Allocation Committee [Ed note: We will not publish an Asset Allocation Weekly Comment the week of November 24. The next comment will be published December 1.] Over the past three weeks, we have seen a rise in the yields on high-yield bonds.  The Merrill Lynch High Yield bond effective index is up 40 bps… Read More »

Asset Allocation Weekly (November 10, 2017)

by Asset Allocation Committee Last week, we discussed our views of the debt markets.  However, one item we didn’t examine was the dynamics of the yield curve.  The U.S. Treasury market has both a domestic and an international component.  While all sovereign debt markets have a domestic component, the international component is especially a factor for… Read More »

Asset Allocation Weekly (November 3, 2017)

by Asset Allocation Committee The 10-year Treasury yield has recently been trending upward. Since early September, yields have risen from 2.06% to 2.46%.  What’s behind this rise and do we expect it to continue? We use our 10-year T-note model for guidance.  It estimates the fair value level of the 10-year T-note yield based on the… Read More »

Asset Allocation Weekly (October 27, 2017)

by Asset Allocation Committee It is expected that over the next two weeks President Trump is going to appoint a new Federal Reserve Open Market Committee (FOMC) chair and vice chair.  In this report, we will build scenarios of how policy could change depending upon whom the president appoints. This spreadsheet details our estimate of policy… Read More »

Asset Allocation Weekly (October 20, 2017)

by Asset Allocation Committee The Financial Accounts of the United States (formerly known as the Flow of Funds Report) is published by the Federal Reserve and provides data on the level of financial assets and liabilities by sector.  Using this data, we can approximate the average asset allocation of American households over different periods.  This accounting… Read More »

Asset Allocation Weekly (October 13, 2017)

by Asset Allocation Committee With the S&P making new highs almost daily, it is probably a good time to look at long-term trends to build some parameters. This is a simple trend chart of the S&P 500 Index.  We have log-transformed the weekly Friday closes of the index data and regressed it against a time trend. … Read More »

Asset Allocation Weekly (October 6, 2017)

by Asset Allocation Committee The latest FOMC meeting and subsequent comments from Chair Yellen have increased the likelihood of a December rate hike. This chart shows the implied likelihood of a rate hike compared to steady policy from fed funds futures for the December meeting.  In early December, the projected odds of a hike were just… Read More »

Asset Allocation Weekly (September 29, 2017)

by Asset Allocation Committee The Financial Accounts of the U.S. was released last week by the Federal Reserve.  The report is a treasure trove of data about the economy.  This report shows the flow of funds and the balance sheet of the American economy.  Although there is much to look at, here are a few charts… Read More »

Asset Allocation Weekly (September 22, 2017)

by Asset Allocation Committee In a recent speech,[1] New York FRB President Bill Dudley made the case that the FOMC should continue to reduce monetary stimulus even though inflation remains below target.  His contention is that benign financial conditions in the face of tighter policy are creating distortions in financial markets, resulting in the need for… Read More »

Asset Allocation Weekly (September 15, 2017)

by Asset Allocation Committee In our most recent asset allocation rebalancing, we added foreign allocations to our portfolios.  Over the past few years, we had generally avoided allocations to non-U.S. markets in asset allocation portfolios due to two primary concerns.  First, the dollar had been appreciating as a result of an improving U.S. economy and policy… Read More »

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