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 – Examining the Rise in T-Note Yields (August 28, 2023)

by the Asset Allocation Committee | PDF Perhaps the most interesting market event this month has been the rapid jump in 10-year Treasury note yields.  At the end of May, the 10-year Treasury was yielding 3.64%, but recently the yield hit 4.36%.  What’s behind this jump?  Here are a few reasons behind the rise: Treasury… Read More »

Asset Allocation Bi-Weekly – Where’s the Recession? Examining Employment (August 14, 2023)

by the Asset Allocation Committee | PDF In August of last year, our yield-curve indicator signaled an inversion, which implies that a recession is set to occur within 16 months, on average.  And so, we are still within range of a recession occurring by year’s end.  However, the economic data continues to show improvement, raising… Read More »

Asset Allocation Bi-Weekly – Part-Time Troubles (July 31, 2023)

by the Asset Allocation Committee | PDF The job market has greatly surpassed the expectations of leading experts so far this year. Back in December, a Bloomberg survey found that economists predicted that monetary policy tightening by the Federal Reserve would push the country into a recession in the first half of 2023. They estimated… Read More »

Asset Allocation Bi-Weekly – Are Higher Interest Rates Bearish for Risk Assets? (July 17, 2023)

by the Asset Allocation Committee | PDF Orthodox finance and economics rests on the idea that higher interest rates reduce economic activity and lower the attractiveness of risk assets.  We have no real quarrel with the part about reducing economic activity as higher borrowing costs will tend to slow investment and consumer durable spending.  The… Read More »

Asset Allocation Bi-Weekly – The Green Shoots of Re-Industrialization (July 3, 2023)

by the Asset Allocation Committee | PDF In a little-noticed report last month, total construction spending in April was up a modest 6.1% from one year earlier, but private nonresidential construction spending was up a whopping 30.2%.  That marked the fourth straight month in which private, nonresidential construction, a proxy for commercial construction, was up… Read More »

Asset Allocation Bi-Weekly – The Great Divergence (June 20, 2023)

by the Asset Allocation Committee | PDF The S&P 500 is up 10% year-to-date and briefly reached the 4,200 level in late May. The recent rally in equity markets has been driven by the rise of generative artificial intelligence (AI), which has bolstered tech stocks. In fact, much of this strong performance has come from… Read More »

Asset Allocation Bi-Weekly – Weak Capital Investment by State and Local Governments (June 5, 2023)

by the Asset Allocation Committee | PDF The standoff between the Biden administration and congressional Republicans over raising the federal debt limit has prompted us to think more deeply about some important longer-term issues regarding U.S. public spending.  As we discuss in this report, a key problem is that one particular type of government investment… Read More »

Asset Allocation Bi-Weekly – The Case for New Home Sales (May 22, 2023)

by the Asset Allocation Committee | PDF A common topic among the financial markets is the impact of rapid monetary policy tightening.  After years of accommodative monetary policy, the spike in inflation caused by the pandemic has continued to persist.  To address the inflation issue, the FOMC has lifted the policy target rate at the… Read More »

Asset Allocation Bi-Weekly – Why We Are Keeping Duration Short (May 8, 2023)

by the Asset Allocation Committee | PDF Financial markets are complicated, and when faced with complication, there is an incentive to simplify.  This simplification process takes on several forms, including narratives, bromides, adages, etc.  Even the modeling process is a form of simplification.  Sayings like “don’t fight the Fed” or “cash is trash” are often… Read More »

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