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 (July 10, 2020)

by Asset Allocation Committee Equity markets, to a greater or lesser degree, tend to reflect social and political trends.  After all, the mood of investors plays a role in the propensity to move money into stock markets.  Unfortunately, the impact of social or political events on equities tends to be a mixed bag.  The chart below… Read More »

Asset Allocation Weekly (June 26, 2020)

by Asset Allocation Committee (N.B.  Due to the Independence Day holiday, the next report will be issued on July 10, 2020.) Since 2008, some central banks have implemented negative policy interest rates.  Standard economics suggests that negative nominal rates on deposits are impossible because holders could simply liquidate the deposit and “put the money under the… Read More »

Asset Allocation Weekly (June 19, 2020)

by Asset Allocation Committee By now, investors have rightly come around to the idea that the equity market’s strong rebound since late March can be largely ascribed to the aggressive monetary and fiscal policies put in place to counter the coronavirus crisis.  The economic downturn from the pandemic lockdown has been severe, pushing unemployment to its… Read More »

Asset Allocation Weekly (June 12, 2020)

by Asset Allocation Committee Although gold is the primary precious metal for investors, platinum, palladium and silver also can fulfill that role.  Complicating matters is that these three metals are dual-use products.  Unlike gold, which has few uses outside of monetary (store of value) purposes and jewelry, these other three have industrial uses as well.  About… Read More »

Asset Allocation Weekly (June 5, 2020)

by Asset Allocation Committee Last week, we discussed how equity markets, because of their anticipatory nature, tend to bottom in advance of the end of recessions.  Assuming that condition continues, if our expectations for a short recession (but probably a long recovery) are correct, it would make sense that the equity market would have already bottomed. … Read More »

Asset Allocation Weekly (May 29, 2020)

by Asset Allocation Committee The recent strong rally in equities has befuddled investors—how can equities rally with such vigor when the economy is historically weak?  We suspect there are two reasons for this recovery: Although the drop in economic activity is deep, it will likely be short. Supportive monetary policy is a powerful elixir for equities.… Read More »

Asset Allocation Weekly (May 22, 2020)

by Asset Allocation Committee Beginning in the late 1990s and becoming an even bigger issue after Dodd-Frank regulations were imposed following the Great Recession, many market participants worried that bond market liquidity would be absent in the face of a crisis.  Strict regulations discouraged banks and brokerage firms from holding large inventories of corporate bonds, thereby… Read More »

Asset Allocation Weekly (May 15, 2020)

by Asset Allocation Committee As the Federal Reserve expands its balance sheet and the federal deficit balloons, there is a legitimate concern about the potential for inflation.  In this week’s report, we will examine inflation from a theoretical perspective. There are two simple tools we use to discuss inflation, the equation of exchange and the intersection… Read More »

Asset Allocation Weekly (May 8, 2020)

by Asset Allocation Committee The U.S. economy has been hit with shelter-in-place orders that have depressed consumption and reduced production.  The economic readings on Q2 will be historically bad, perhaps even worse than the Great Depression.  However, based on the assumptions that (a) aggressive policy support will continue, and (b) the pandemic will wane over time,… Read More »

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