Asset Allocation Reports
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 »
Asset Allocation Weekly (January 4, 2019)
by Asset Allocation Committee Quantitative easing (QE) was an element of unconventional monetary policy that emerged from the Great Financial Crisis. When the Federal Reserve lowered the fed funds target to zero (known as the “zero interest rate policy,” or ZIRP), policymakers decided that taking the policy rate below zero would not further stimulate the economy. … Read More »
Asset Allocation Weekly (December 21, 2018)
by Asset Allocation Committee (N.B. This is the last Asset Allocation Weekly for 2018. Have a Merry Christmas and Happy New Year. The next report will be published January 4, 2019.) The U.S. economy is performing in line with the rest of the world. This chart shows the yearly change in U.S. and world ex-U.S. GDP. … Read More »
Asset Allocation Weekly (December 14, 2018)
by Asset Allocation Committee Equity markets have come under pressure this autumn. The weakness has gained momentum in recent weeks. This chart shows the yearly change in the S&P 500 Index on a monthly average basis. We have added recession shading; in general, recessions tend to trigger bear market declines of 20% or more. In fact,… Read More »
Asset Allocation Weekly (December 7, 2018)
by Asset Allocation Committee The election of Donald Trump has been characterized as part of a populist uprising. In the president’s inaugural address, he talked about the “forgotten” that would have a voice in his administration. At the same time, we work under John Mitchell’s dictum of “watch what we do, not what we say.”[1] In… Read More »
Asset Allocation Weekly (November 30, 2018)
by Asset Allocation Committee As the FOMC raises rates, there are increasing concerns about the credit markets. After a long period of low rates, credit spreads are starting to widen, raising fears of financial stress. In this report, we will look at these concerns. First, here is what we are seeing with credit spreads: This chart… Read More »
Asset Allocation Weekly (November 16, 2018)
by Asset Allocation Committee (NB: Due to the Thanksgiving holiday, the next report will be published on November 30.) Last year, 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… Read More »
Asset Allocation Weekly (November 9, 2018)
by Asset Allocation Committee In light of rising interest rates, this week we will take a look at credit spreads. But, before doing that, it makes sense to examine overall Treasury valuation. This chart is our 10-year T-note model. It incorporates fed funds, the Japanese yen exchange rate, German sovereign 10-year yields, oil prices, the fiscal… Read More »
Asset Allocation Weekly (November 2, 2018)
by Asset Allocation Committee In light of the recent pullback in equities, there has been rising speculation that the FOMC might not increase rates as much as projected. Although possible, we are not seeing much evidence to support this position. This chart shows the fed funds target along with the implied three-month LIBOR rate, two years… Read More »