Asset Allocation Reports

Asset Allocation Quarterly (Second Quarter 2019)

The Federal Reserve shifted fully from its hawkish stance at the beginning of the year. We anticipate that the committee will maintain its newly dovish stance with the potential for further monetary accommodation. Though the employment/population ratio has improved, we find it still indicates slack in the labor force, blunting the full impact of wage… Read More »

Asset Allocation Weekly (April 12, 2019)

by Asset Allocation Committee The employment data is closely watched by financial markets; although the data isn’t necessarily a leading indicator for the economy, it is probably the most important from a political and social perspective.  Weak employment data is a worry for political incumbents and concerning to policymakers.  However, beyond the headline data, there are… Read More »

Asset Allocation Weekly (April 5, 2019)

by Asset Allocation Committee Mortgage-backed securities have rather odd characteristics compared to Treasuries.  At their most basic level, mortgages are bonds—prices are inversely related to yields.  The pricing on mortgages assumes a certain level of refinancing activity.  However, when yields rise, expected mortgage duration tends to extend because mortgage holders are less likely to refinance.  When… Read More »

Asset Allocation Weekly (March 29, 2019)

by Asset Allocation Committee Long-dated Treasury bonds have enjoyed a strong rally in recent weeks.  Fears about future U.S. economic growth, falling global economic growth and a reversal in monetary policy expectations have all conspired to lower yields.  The question now is whether or not yields have fallen more than is justified by the fundamental factors.… Read More »

Asset Allocation Weekly (March 22, 2019)

by Asset Allocation Committee One factor we have been tracking is the recent behavior of retail money market funds.  We have noted that households began building money market funds about the time that the equity market peaked and U.S. trade policy began to turn toward protectionism.  In the coming months, money market funds continued to rise… Read More »

Asset Allocation Weekly (March 15, 2019)

by Asset Allocation Committee The Financial Accounts of the United States, formerly known as the Flow of Funds Report, was released last week.  It is a plethora of information about the state of the economy.  Below we discuss the charts we find most noteworthy. First, here is the saving balance by sector. The tax cut has… Read More »

Asset Allocation Weekly (March 8, 2019)

by Asset Allocation Committee The Federal Reserve is experiencing a crisis of sorts.  For years, policymakers have used the Phillips Curve as a guide to policy.  The Phillips Curve postulates that there is a tradeoff between inflation and unemployment. Essentially, to quell inflation policymakers need to raise rates to create unemployment.  The basic idea is that… Read More »

Asset Allocation Weekly (March 1, 2019)

by Asset Allocation Committee Our cyclical position on foreign investing remains with a zero allocation; although the committee has not been negative on foreign, our work suggested that the risk/reward compared to small and mid-cap stocks warranted putting more assets in those areas.  However, we are continuing to pay close attention to foreign as an area… Read More »

Asset Allocation Weekly (February 22, 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 with 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 15, 2019)

by Asset Allocation Committee The pullback in equities in Q4 coincided with a sharp drop in long-duration Treasury yields.  However, the recovery seen in early 2019 has not led to a rise in yields. This chart shows the S&P 500 (left axis) and the 10-year T-note yield (right axis).  Note that yields and the equity markets… Read More »

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