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 (March 20, 2020)

by Asset Allocation Committee During the recent market tumult, gold has performed rather well, until lately. This chart shows the nearest gold futures contract over the past year.  From mid-January, when reports of COVID-19 began to circulate, gold prices marched steadily higher, making an intraday high of $1,704.30.  Since then, this has declined by over $250… Read More »

Asset Allocation Weekly (March 13, 2020)

by Asset Allocation Committee Our baseline position has been that the COVID-19 virus would have a significant impact in terms of magnitude but be of limited duration and thus would probably not put the economy into recession.  Over the past week, two events have occurred which put this position into question.  The first is the oil… Read More »

Asset Allocation Weekly (March 6, 2020)

by Asset Allocation Committee In the turmoil caused by COVID-19, fixed income has performed remarkably well.  Ten-year T-note yields have declined to record lows and, as we will show below, there is no evidence of severe stress in the credit markets. First, here is what we are seeing in Treasuries. This chart shows our 10-year T-note… Read More »

Asset Allocation Weekly (February 28, 2020)

by Asset Allocation Committee Since the end of the Financial Crisis, there has been a steady deterioration in investment-grade credit quality. This chart shows the percentage of investment-grade bonds rated at BBB.  Since late 2018, this portion has represented half of outstanding investment-grade credit.  This rating is the lowest end of investment-grade credit, so the dominance… Read More »

Asset Allocation Weekly (February 21, 2020)

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 (February 14, 2020)

by Asset Allocation Committee The data on U.S. residential real estate has been improving in recent months.  Housing tends to have an outsized effect on the economy.  Not only do housing purchases trigger follow-on buying of consumer durable goods (e.g., furniture and furnishings, etc.) but non-durables as well (e.g., basic household items).  A house is an… Read More »

Asset Allocation Weekly (February 7, 2020)

by Asset Allocation Committee The Commerce Department recently released its first iteration of Q4 GDP.  The overall growth rate, at 2.1%, was mostly on forecast but the composition of the growth showed some unexpected developments.  In this week’s report, we will examine the most interesting changes and what it may be telling us about future economic… Read More »

Asset Allocation Weekly (January 31, 2020)

by Asset Allocation Committee Last week, we updated our thoughts about a melt-up in equity markets.  We observed that retail flows had diverged from equity market performance and noted that if sentiment shifts and retail investors come into equities, the market could rise rapidly to levels that may not be sustainable.  This week, we are dealing… Read More »

Asset Allocation Weekly (January 24, 2020)

by Asset Allocation Committee One of the risks we noted in the 2020 Outlook: Storm Watch was the potential for a “melt-up.”  On the one hand, seeing a parabolic rise in equities seems like a positive.  On the other, a rise of significant magnitude only occurs because of a surge of late buyers; these latecomers usually… Read More »

Asset Allocation Weekly (January 17, 2020)

by Asset Allocation Committee The December employment data showed three interesting developments that are worth discussing.  They are wage growth, hours worked and the level of “out of the workforce.” Wage growth:  For most of last year, production and non-supervisory wage growth was outpacing that of overall workers.  This development suggested that ordinary workers were finally… Read More »

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