Asset Allocation Bi-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 bi-weekly basis, updating the piece every other Monday.

Asset Allocation Bi-Weekly – The Impossible Trinity (November 14, 2022)

by the Asset Allocation Committee | PDF The U.S. Dollar Index hit a 20-year high in September as the greenback gained against other global currencies. The climb in the U.S. dollar (USD) began in the post-pandemic recovery. Investors flocked to the greenback for safety as the U.S. economy outgrew its peers in the OECD. Aggressive… Read More »

Asset Allocation Bi-Weekly – The Inflation Adjustment for Social Security Benefits in 2023 (October 31, 2022)

by the Asset Allocation Committee | PDF Even for dedicated, successful investors who have built up a substantial nest egg, Social Security retirement and disability investments can be an important part of one’s financial security.  For many Americans, Social Security benefits may be the only significant source of income in old age.  On average, Social… Read More »

Asset Allocation Bi-Weekly – An Update on Bonds (October 17, 2022)

by the Asset Allocation Committee | PDF Our starting point for examining bond yields begins with our yield model.  The key components are fed funds, the 15-year average of CPI (which is a proxy for inflation expectations), the five-year rolling standard deviation of CPI (a measure of inflation volatility), German Bund yields, oil prices, the… Read More »

Asset Allocation Bi-Weekly – The Gold Paradox (October 3, 2022)

by the Asset Allocation Committee | PDF Gold prices have been weak in recent months despite high levels of inflation.  Gold is often considered an inflation hedge, and so the lack of strength is puzzling to many investors.  In this report, we will take a look at gold and try to explain why prices have… Read More »

Asset Allocation Bi-Weekly – The Federal Reserve’s Big Policy Mistake (September 19, 2022)

by the Asset Allocation Committee | PDF If you look at how stocks and other risk assets have lost value since Fed Chair Powell’s short, hawkish speech at Jackson Hole last month, it’s clear he has succeeded in resetting expectations for monetary policy.  Investors now seem to accept that the Fed plans to hike interest… Read More »

Asset Allocation Bi-Weekly – Storm Warning (September 6, 2022)

by the Asset Allocation Committee | PDF Throughout this year, there has been much talk (and confusion) about recession.  Officially, the National Bureau of Economic Research is the formal arbiter of recession.  This private group of economists assesses when there is a broad-based decline in economic activity and when that activity recovers.  It then tells… Read More »

Asset Allocation Bi-Weekly – The Inflation Surprise (August 22, 2022)

by the Asset Allocation Committee | PDF July inflation came in below expectations.  On a yearly basis, the market expected an overall rate of 8.7%, while the actual reading was 8.5%.  For core CPI, the actual was 5.9% compared to expectations of 6.1%.  Perhaps the most bullish part of the report was the monthly change,… Read More »

Asset Allocation Bi-Weekly – The Devil Is in the Details (August 8, 2022)

by the Asset Allocation Committee | PDF U.S. policymakers used deregulation and globalization to corral inflation from 1966 to 1982.  Unfortunately, that policy was at odds with America’s superpower role, which required the U.S. to act as global importer of last resort.  If the U.S. didn’t consume all the goods the world wanted to sell… Read More »

Asset Allocation Bi-Weekly – The Puzzle of the Labor Force (July 25, 2022)

by the Asset Allocation Committee | PDF In the June 27 report, we discussed the idea that the FOMC may focus on reducing job openings rather than raising the unemployment rate as a way to ease labor-market tightness.   The consensus from the establishment survey portion of the June payroll report, which questions employers, was that… Read More »

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