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 (November 4, 2016)
by Asset Allocation Committee With the elections coming next week, it seems like a good time to look at how markets have historically performed during election cycles. We will compare the current election cycle against previous cycles. The blue line in the chart above shows the indexed market return for the period 1928-2015. To create this… Read More »
Asset Allocation Weekly (October 28, 2016)
by Asset Allocation Committee My weekend exercise is to take my dogs on long walks. Both dogs seem to enjoy these walks and I use the time to listen to podcasts. I recently listened to a long podcast that interviewed Sebastian Mallaby, a British journalist and senior fellow at the Council on Foreign Relations. He has… Read More »
Asset Allocation Weekly (October 21, 2016)
by Asset Allocation Committee The dollar has been strengthening over the past few weeks; we believe much of this appreciation is due to expectations of tighter monetary policy. Fed funds futures suggest that there is a 60+% chance of a rate hike at the December FOMC meeting. Although the FOMC is divided and there are prominent… Read More »
Asset Allocation Weekly (October 14, 2016)
by Asset Allocation Committee Given continued sluggish economic growth and fears that monetary policy has reached the point where it can no longer stimulate growth, a renewed attention has been brought to discretionary fiscal policy. In the 1970s, discretionary fiscal policy fell out of favor due to a number of shortcomings: Public investment, if needed, should… Read More »
Asset Allocation Weekly (October 7, 2016)
by Asset Allocation Committee With the elections about a month away, we are fielding an increasing number of questions about the market impact of the result. Although some market commentators are raising concerns about a Trump victory, so far, market data doesn’t seem to suggest a high level of correlation. This chart shows Donald Trump’s average… Read More »
Asset Allocation Weekly (September 30, 2016)
by Asset Allocation Committee Last week, the FOMC left rates unchanged, as expected. The statement was rather hawkish but the accompanying information, such as the “dots” chart, was mostly dovish. Note that three of the 17 members of the committee want to stand pat for the rest of the year and two want to raise rates… Read More »
Asset Allocation Weekly (September 23, 2016)
by Asset Allocation Committee Profit margins are off their highs but have started to improve. This chart takes total S&P 500 operating earnings as a percentage of GDP. Excluding the financial crisis, operating earnings have been running between 5% and 6% of GDP for most of the past decade and a half. In the middle of… Read More »
Asset Allocation Weekly (September 16, 2016)
by Asset Allocation Committee Since the beginning of September, 10-year T-note yields have risen from a low of 1.52% to a high of 1.75%. This backup in yields is as issue we are monitoring carefully because we have favored long-duration assets for some time. We analyze long-dated interest rates by starting with a fair value assessment… Read More »
Asset Allocation Weekly (September 9, 2016)
by Asset Allocation Committee Milton Friedman postulated that inflation expectations are established through a lifetime of experience. To some extent, the issue of inflation expectations is similar to other market gauges in our lives, such as the level of financial markets, interest rates and home prices. What we have experienced is considered as “normal” in our… Read More »