Asset Allocation Bi-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 bi-weekly basis, updating the piece every other Monday.
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 »
Asset Allocation Weekly (January 10, 2020)
by Asset Allocation Committee In our 2020 Outlook, we discussed three risks to the forecast, with one of them being a “melt-up” or a dramatic rise in stock prices. One of the key factors that could bolster higher prices for risk assets would be the idea that the FOMC has engineered a soft landing, which is… Read More »
Asset Allocation Weekly (December 20, 2019)
by Asset Allocation Committee (N.B. This is our last Asset Allocation Weekly for 2019. The next edition will be published January 10, 2020.) Did the Fed engineer a soft landing? That is the critical question for 2020. If the Fed, through its rate cuts last year,[1] has rescued the economy, it would be one of the… Read More »
Asset Allocation Weekly (December 13, 2019)
by Asset Allocation Committee The recent employment report was very strong, with payroll growth rising more than forecast and the unemployment rate declining more than expected. One uncertainty that develops when labor markets tighten is the point at which wage growth begins to lift inflation. This chart shows yearly wage growth and the unemployment rate (inverted… Read More »
Asset Allocation Weekly (December 6, 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 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 (November 22, 2019)
by Asset Allocation Committee (NB: Due to the Thanksgiving holiday, the next report will be published on December 6.) The health of the consumer is critical to the future path of economic growth. For the most part, consumption is accounting for most of the growth in the economy. This chart shows the four-quarter average of the… Read More »
Asset Allocation Weekly (November 15, 2019)
by Asset Allocation Committee The yield curve has steepened since the FOMC started cutting rates, raising hope that a recession can be avoided. In this report, we will examine whether these hopes make sense. The above chart shows two recession indicators from two different regional Federal Reserve banks, Atlanta and New York. The former is a… Read More »
Asset Allocation Weekly (November 8, 2019)
by Asset Allocation Committee The Federal Reserve, in its Financial Accounts of the United States database,[1] has created a Distributional Financial Accounts sub-database that measures household wealth by percentile groups. The data is only reported in four broad categories (Top 1%, 90% to 99%, 50% to 89%, and bottom 50%) and has a fairly short history,… Read More »
Asset Allocation Weekly (November 1, 2019)
by Asset Allocation Committee We continue to hold a favorable outlook toward gold despite evidence that current prices may be getting a bit ahead of themselves. Our gold model puts fair value at 1391. In the coming months, we expect the fair value to rise; both the ECB and the Federal Reserve have resumed expanding their… Read More »