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 (February 10, 2017)

by Asset Allocation Committee For better or worse, the Federal Reserve tends to conduct policy based on some variant of the Taylor Rule, which essentially means that the FED sets the policy interest rate based upon changes in the inflation rate and the level of slack in the economy.  The rule suggests that if there is… Read More »

Asset Allocation Weekly (February 3, 2017)

by Asset Allocation Committee Although our current allocation models exclude emerging markets, we still monitor various emerging market nations for potential opportunities.  A country that has been in the news recently is Mexico.  President Trump has been targeting Mexico and the North American Free Trade Agreement (NAFTA) for Mexico’s persistent trade surpluses with the U.S. This… Read More »

Asset Allocation Weekly (January 27, 2017)

by Asset Allocation Committee The consensus estimate for Q4 2016 S&P 500 operating earnings growth is 3.2%, which translates into a forecast of $118.35 per share for the S&P 500, using Thomson/Reuters data.  Using a similar growth rate, the Standard and Poor’s calculation of operating earnings generates annual earnings of $102.16.  Simply put, these two sources… Read More »

Asset Allocation Weekly (January 20, 2017)

by Asset Allocation Committee After a short foray into emerging markets, we exited that position in our latest allocation.  Prior to the Trump victory, we had expected the dollar to weaken which would have supported emerging markets.  However, the dollar’s resurgence is a bearish factor for emerging markets, leading the Asset Allocation Committee to look elsewhere… Read More »

Asset Allocation Weekly (January 13, 2017)

by Asset Allocation Committee Last week, we reviewed Sebastian Mallaby’s recent biography of Alan Greenspan.[1]  This week, we will focus on the issue of financial crises and financial stability.  As noted in last week’s review, the financial system has evolved from a disjointed and diffuse system where banks could not establish themselves across state lines to… Read More »

Asset Allocation Weekly (January 6, 2017)

by Asset Allocation Committee Over the holiday, I had the pleasure of reading Sebastian Mallaby’s recent biography of Alan Greenspan.[1]  The book was thoroughly researched and well-written, and I recommend it to our readers, albeit with fair warning—it’s long and the endnotes are critical to fully understanding the points of the work. Here are the key… Read More »

Asset Allocation Weekly (December 23, 2016)

by Asset Allocation Committee Due to the upcoming holidays, the next edition of this report will be published on January 6, 2017. The Fed gave us a modest hawkish surprise last week, calling for three rate hikes in 2017 rather than two.  The news has boosted Treasury yields and lifted the dollar.  Equities mostly absorbed the… Read More »

Asset Allocation Weekly (December 16, 2016)

by Asset Allocation Committee Equity markets are expensive by numerous measures and have become even more extended in the wake of the “Trump Rally.”  As noted in our weekly P/E update (found in the last section of the Daily Comment), our four-quarter measure of the P/E is elevated.  Another well-known derivation of the “Buffet Indicator” has… Read More »

Asset Allocation Weekly (December 9, 2016)

by Asset Allocation Committee The rapid rise in longer duration Treasury yields since the presidential election has been surprising.  As of December 8, the 10-year T-note yield was approximately 2.40%.  Although President-elect Trump’s policies will probably be inflationary, it is still unclear how much of his arguably vague plans will get passed.  It is possible the… Read More »

Asset Allocation Weekly (December 2, 2016)

by Asset Allocation Committee Last week, we discussed the likely implications of President-elect Trump’s policies on the debt markets.  This week, we will look at the impact on the dollar.  Since the election, the dollar has generally moved higher. Using the Bloomberg dollar index, a broad-based currency measure, the dollar rose nearly 5% after the election. … Read More »

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