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 (March 23, 2018)
by Asset Allocation Committee Last week, the Federal Reserve published its Financial Accounts of the United States report, formerly known as the Flow of Funds report. The report is a storehouse of important financial information. In this most recent report, a few things emerged that raised concerns. The first issue is net saving. Net saving is… Read More »
Asset Allocation Weekly (March 16, 2018)
by Asset Allocation Committee Last week, we discussed the fact that the generally strong economy should be supportive for equity markets as economic growth will tend to support earnings. However, the other important element of equity valuation is what multiple investors put on those earnings. The most common valuation metric is the price/earnings ratio (P/E). Our… Read More »
Asset Allocation Weekly (March 9, 2018)
by Asset Allocation Committee Last year, we introduced an indicator of the basic health of the economy and added it to the many charts we monitor in gauging 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 (March 2, 2018)
by Asset Allocation Committee The recent rise in long-duration yields has been partially blamed on rising inflation expectations. Although this reason is a possible explanation, the reality is that it’s more likely the fixed income markets are simply adjusting to a faster pace of policy tightening. In this report, we examine the differences between cyclical and… Read More »
Asset Allocation Weekly (February 23, 2018)
by Asset Allocation Committee Last week, we discussed the impact of the growing fiscal deficit on the economy and markets. We did note that fiscal deficits have tended to weaken the dollar. This week, we want to expand on that analysis. To start, we note that fiscal policy does not operate in a vacuum. To measure… Read More »
Asset Allocation Weekly (February 16, 2018)
by Asset Allocation Committee Do fiscal deficits matter? This is one of the more polarizing topics in economics. The recent tax bill and budget agreement will increase the deficit, which has led to all sorts of worries and claims. Here are a few observations: Politically, deficits matter to the party out of power. Protesting against deficits… Read More »
Asset Allocation Weekly (February 9, 2018)
by Asset Allocation Committee The continued rise in long-term interest rates is clearly grabbing the attention of financial markets. Stronger than expected wage growth was the proximate cause of the recent lift in yields. Although overall wages rose 2.9%, wages for production and non-supervisory workers grew only 2.4%. Still, it is clear that fears of inflation… Read More »
Asset Allocation Weekly (February 2, 2018)
by Asset Allocation Committee The World Economic Forum in Davos was held recently and various comments were made about the dollar during the meetings. Treasury Secretary Mnuchin seemed to imply that the administration was talking the dollar lower, a violation of unwritten protocols that make it acceptable to have a weaker currency in support of growth… Read More »
Asset Allocation Weekly (January 26, 2018)
by Asset Allocation Committee Equity markets have been steadily rising, with the major indices making a series of new all-time highs. The recent impetus to equities has been the tax law. As we detailed in our recent addendum to our 2018 Outlook,[1] the tax bill will shift about 1.3% of GDP to after-tax corporate profits. This… Read More »