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 Weekly (March 2, 2018)
by Asset Allocation Committee The recent rise in long-duration yields has been partially blamed on rising inflation expectations. Although this reason is a possible explanation, the reality is that it’s more likely the fixed income markets are simply adjusting to a faster pace of policy tightening. In this report, we examine the differences between cyclical and… Read More »
Asset Allocation Weekly (February 23, 2018)
by Asset Allocation Committee Last week, we discussed the impact of the growing fiscal deficit on the economy and markets. We did note that fiscal deficits have tended to weaken the dollar. This week, we want to expand on that analysis. To start, we note that fiscal policy does not operate in a vacuum. To measure… Read More »
Asset Allocation Weekly (February 16, 2018)
by Asset Allocation Committee Do fiscal deficits matter? This is one of the more polarizing topics in economics. The recent tax bill and budget agreement will increase the deficit, which has led to all sorts of worries and claims. Here are a few observations: Politically, deficits matter to the party out of power. Protesting against deficits… Read More »
Asset Allocation Weekly (February 9, 2018)
by Asset Allocation Committee The continued rise in long-term interest rates is clearly grabbing the attention of financial markets. Stronger than expected wage growth was the proximate cause of the recent lift in yields. Although overall wages rose 2.9%, wages for production and non-supervisory workers grew only 2.4%. Still, it is clear that fears of inflation… Read More »
Asset Allocation Weekly (February 2, 2018)
by Asset Allocation Committee The World Economic Forum in Davos was held recently and various comments were made about the dollar during the meetings. Treasury Secretary Mnuchin seemed to imply that the administration was talking the dollar lower, a violation of unwritten protocols that make it acceptable to have a weaker currency in support of growth… Read More »
Asset Allocation Weekly (January 26, 2018)
by Asset Allocation Committee Equity markets have been steadily rising, with the major indices making a series of new all-time highs. The recent impetus to equities has been the tax law. As we detailed in our recent addendum to our 2018 Outlook,[1] the tax bill will shift about 1.3% of GDP to after-tax corporate profits. This… Read More »
Asset Allocation Weekly (January 19, 2018)
by Asset Allocation Committee Since the beginning of the year, long-term interest rates have moved higher. The constant maturity 10-year Treasury yield ended 2017 at 2.40%. That yield climbed to 2.60% in January, which is above our recently released 2018 Outlook forecast. We are not adjusting our forecast quite yet because the driving factor behind our… Read More »
Asset Allocation Weekly (January 12, 2018)
by Asset Allocation Committee Last week, we issued an addendum to our 2018 Outlook[1] to take into account the recent tax law changes. Our top-down analysis suggests there will be a significant increase in corporate earnings which will translate into higher S&P 500 earnings. Our original forecast was for $129.82[2] for 2018; we have increased our… Read More »
Asset Allocation Weekly (January 5, 2018)
by Asset Allocation Committee Equity markets had a very strong 2017, with the S&P 500 up over 20% for the year. Earnings rose more than expected, the economy continued to expand and investor sentiment was buoyant, all of which contributed to rising equities. The tax bill, signed in late December, will give equities a lift going… Read More »