Asset Allocation Reports

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 »

Asset Allocation Weekly (February 8, 2019)

by Asset Allocation Committee Gold is considered by some to be a commodity, but we treat it as a non-liability-backed currency.  In other words, gold isn’t created because someone makes a loan.  Instead, it is created by mining.  In addition, most commodities are consumed but much of the gold refined through the ages still exists.  In… Read More »

Asset Allocation Weekly (February 1, 2019)

by Asset Allocation Committee In our analysis, both small caps and mid-caps are undervalued relative to their large cap cousins. These charts compare mid-caps and small caps to large cap stocks.  We log-transform the data and use a time trend to scale the transformed indices as well.  The lower line on both charts indicate that small… Read More »

Asset Allocation Weekly (January 25, 2019)

by Asset Allocation Committee One of the important unknown factors for 2019 is whether slowing global growth will have a negative impact on the U.S. economy.  Or, put another way, can the world lead the U.S. into recession?  For the most part, history suggests the answer is no—the U.S. can bring down the world but the… Read More »

Asset Allocation Weekly (January 18, 2019)

by Asset Allocation Committee Equity markets struggled in 2018; although new highs were achieved twice during the year, volatility was elevated compared to 2017. This is a chart of the CBOE VIX index, a measure of implied volatility from the equity options market.  An elevated VIX means implied volatility is high, which implies a wider dispersion… Read More »

Asset Allocation Quarterly (First Quarter 2019)

Our expectations are that the U.S. economy will continue to grow, albeit at a more modest pace of 2.7% While we anticipate the current economic expansion will become the longest on record this March, the risk of a downturn rises toward the end of our three-year forecast period We expect the Fed to suspend its… Read More »

Asset Allocation Weekly (January 11, 2019)

by Asset Allocation Committee Does the Federal Reserve adjust policy for asset prices?  This is perhaps one of the most controversial topics in U.S. monetary policy.  Alan Greenspan faced this issue in the early 1990s.  Both Volcker and Greenspan wanted to focus monetary policy on containing inflation.  But, Larry Lindsey, a Fed governor at the time,… Read More »

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