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 – U.S. Oil Production at a Record High (February 5, 2024)

by the Asset Allocation Committee | PDF These days, because investors have so many different assets to buy in so many different financial markets, it can be easy to miss an important trend or change in trend.  Indeed, that seems to be the case with crude oil, where the long stagnation in U.S. output after… Read More »

Asset Allocation Bi-Weekly – How Does Powell Define Restrictive Monetary Policy? (January 22, 2024)

by the Asset Allocation Committee | PDF Traditionally, the term “restrictive monetary policy” has been associated with a fed funds interest rate that is high enough to slow economic activity, but recent remarks from Federal Reserve Chair Powell suggest there may be a broader interpretation. Despite casting doubts on rate cuts just two weeks prior,… Read More »

Asset Allocation Bi-Weekly – A Pause That Refreshes? (December 4, 2023)

by the Asset Allocation Committee | PDF (Note: This is the final AABW of 2023; the next report will be published in January 2024.) In 1929, Coca-Cola® introduced the tagline “a pause that refreshes.”  Although other advertising campaigns have come and gone, this line still sticks around in the public consciousness.  And, it has moved… Read More »

Asset Allocation Bi-Weekly – Reflections on Earnings (November 20, 2023)

by the Asset Allocation Committee | PDF The third quarter’s earnings season is coming to a close and, once again, earnings beat expectations.  In this report, we will take a more in-depth look at S&P 500 earnings and overall corporate earnings. This chart examines S&P 500 earnings on a four-quarter trailing basis.  We have regressed… Read More »

Asset Allocation Bi-Weekly – The Inflation Adjustment for Social Security Benefits in 2024 (November 6, 2023)

by the Asset Allocation Committee | PDF Social Security was the second-largest contributor to the increase in the fiscal deficit in 2023 (behind only net interest on debt), accounting for $134 billion. Much of the increase in entitlement spending was due to the 8.7% surge in cost-of-living adjustments (COLAs), which was the largest jump since… Read More »

Asset Allocation Bi-Weekly – A Regime Change in Bonds? (October 23, 2023)

by the Asset Allocation Committee | PDF Jim Bullard, former president of the St. Louis Federal Reserve Bank, based his policy votes and economic analysis, in part, on a concept known as regimes.  Our take on his concept is that an edifice of factors underly clearly observable correlations in markets, and when this edifice changes,… Read More »

Asset Allocation Bi-Weekly – The FOMC in 2024 (October 9, 2023)

by the Asset Allocation Committee | PDF The Federal Reserve’s Federal Open Market Committee (FOMC) votes on monetary policy.  The FOMC consists of seven governors, the New York FRB president, and a rotating roster of four regional presidents who serve a one-year term on the committee.  This rotation feature means that the policy leanings of… Read More »

Asset Allocation Bi-Weekly – Where’s the Recession? A Recap (September 25, 2023)

by the Asset Allocation Committee | PDF Precise recession forecasting is really difficult.  Most recessions occur during periods of tightening monetary policy; however, history shows that monetary policy works with “long and variable lags,” meaning that the impact of rising interest rates doesn’t lead to consistent timing of downturns.  It’s a bit like wanting to… Read More »

Asset Allocation Bi-Weekly – Fiscal Tightening Looms (September 11, 2023)

by the Asset Allocation Committee | PDF To understand the state of the U.S. economy and gauge near-term financial prospects, investors over the last couple of years have focused on issues like the Federal Reserve’s monetary policy, consumer price inflation, labor market indicators, and retail sales.  They seemed to pay much less attention to fiscal… Read More »

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