Asset Allocation 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 weekly basis in a special section within our Daily Comment report, updating the piece every Friday.

Asset Allocation Weekly (December 13, 2019)

by Asset Allocation Committee The recent employment report was very strong, with payroll growth rising more than forecast and the unemployment rate declining more than expected.  One uncertainty that develops when labor markets tighten is the point at which wage growth begins to lift inflation. This chart shows yearly wage growth and the unemployment rate (inverted… Read More »

Asset Allocation Weekly (December 6, 2019)

by Asset Allocation Committee In 2017, we introduced an indicator of the basic health of the economy and added it to the many charts we monitor to gauge market conditions.  The indicator is constructed using commodity prices, initial claims and consumer confidence.  The thesis behind this indicator is that these three components should offer a simple… Read More »

Asset Allocation Weekly (November 22, 2019)

by Asset Allocation Committee (NB: Due to the Thanksgiving holiday, the next report will be published on December 6.) The health of the consumer is critical to the future path of economic growth.  For the most part, consumption is accounting for most of the growth in the economy. This chart shows the four-quarter average of the… Read More »

Asset Allocation Weekly (November 15, 2019)

by Asset Allocation Committee The yield curve has steepened since the FOMC started cutting rates, raising hope that a recession can be avoided.  In this report, we will examine whether these hopes make sense. The above chart shows two recession indicators from two different regional Federal Reserve banks, Atlanta and New York.  The former is a… Read More »

Asset Allocation Weekly (November 8, 2019)

by Asset Allocation Committee The Federal Reserve, in its Financial Accounts of the United States database,[1] has created a Distributional Financial Accounts sub-database that measures household wealth by percentile groups.  The data is only reported in four broad categories (Top 1%, 90% to 99%, 50% to 89%, and bottom 50%) and has a fairly short history,… Read More »

Asset Allocation Weekly (November 1, 2019)

by Asset Allocation Committee We continue to hold a favorable outlook toward gold despite evidence that current prices may be getting a bit ahead of themselves.  Our gold model puts fair value at 1391. In the coming months, we expect the fair value to rise; both the ECB and the Federal Reserve have resumed expanding their… Read More »

Asset Allocation Weekly (October 25, 2019)

by Asset Allocation Committee For nearly two years, the energy sector has dramatically underperformed the overall equity market and oil prices. This chart shows our S&P energy sector model.  We regress the overall S&P 500 and oil prices against the energy sector.  For most of the index’s history, these two variables explained much of the behavior… Read More »

Asset Allocation Weekly (October 18, 2019)

by Asset Allocation Committee In 2017, we introduced an indicator of the basic health of the economy and added it to the many charts we monitor to gauge market conditions.  The indicator is constructed using commodity prices, initial claims and consumer confidence.  The thesis behind this indicator is that these three components should offer a simple… Read More »

Asset Allocation Weekly (October 11, 2019)

by Asset Allocation Committee The financial markets have been roiled recently by the apparent shortage of liquidity in the repo markets.  Our take is that the problem is twofold—there are regulatory problems that mean the banking system requires more in reserves than it did prior to the Great Financial Crisis, and there are likely industry concentration… Read More »

Asset Allocation Weekly (October 4, 2019)

by Asset Allocation Committee Although the convention for measuring earnings is compared to shares, Standard and Poor’s also calculates the level of operating earnings for all the stocks in the S&P 500. The per-share value is calculated by dividing this number by the S&P divisor.  The advantage of this number versus the per-share data is that… Read More »

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