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 (September 15, 2017)
by Asset Allocation Committee In our most recent asset allocation rebalancing, we added foreign allocations to our portfolios. Over the past few years, we had generally avoided allocations to non-U.S. markets in asset allocation portfolios due to two primary concerns. First, the dollar had been appreciating as a result of an improving U.S. economy and policy… Read More »
Asset Allocation Weekly (September 8, 2017)
by Asset Allocation Committee As the FOMC prepares to reduce its balance sheet, it’s a good time to update our views on long-term interest rates. The chart below shows our current estimate of fair value for the 10-year Treasury. The model uses fed funds, the 15-year moving average of CPI (an inflation expectations proxy), the yen/dollar… Read More »
Asset Allocation Weekly (September 1, 2017)
by Asset Allocation Committee We have previously documented the difference between S&P 500 operating earnings reported by Thomson/Reuters and Standard and Poor’s. Although both series purport to measure the same thing, there can be rather wide divergences. These exist due to differences in how unusual events are accounted for; we do often see long periods where… Read More »
Asset Allocation Weekly (August 25, 2017)
by Asset Allocation Committee When President Trump was elected, there were expectations that fiscal policy would become more stimulative, which would lead to faster growth, tighter monetary policy and dollar strength. There were also promises of regulatory relief. In November, soon after the election, financial markets, exercising their usual pattern of discounting the future, immediately began… Read More »
Asset Allocation Weekly (August 18, 2017)
by Asset Allocation Committee A number of market commentators have suggested current conditions are similar to 1987. Complacency, shown by the low level of volatility and an elevated P/E, is rampant. On the other hand, there is no evidence a recession is looming and, although monetary policy is tightening, the Federal Reserve has been raising rates… Read More »
Asset Allocation Weekly (August 11, 2017)
by Asset Allocation Committee Although measuring “malaise” is more art than science, overall feelings of wellbeing or the lack thereof affect markets, politics, etc. One less common way to measure this is the ratio between discretionary spending compared to overall spending. Discretionary spending is defined as total spending less what is spent on food, clothing, energy… Read More »
Asset Allocation Weekly (August 4, 2017)
by Asset Allocation Committee Two weeks ago, we detailed our expectations for a weaker dollar. If we are correct, one of the potential effects could be inflation. A weaker dollar has two price effects. First, it directly raises import prices. Second, it gives pricing power to domestic firms competing with imports as price pressures should dissipate… Read More »
Asset Allocation Weekly (July 28, 2017)
by Asset Allocation Committee As the S&P 500 steadily rises to new highs, concerns about a correction will likely increase. Since 1987, major market pullbacks have been associated with recessions and there isn’t much evidence to suggest the business cycle is set to turn. In the absence of a recession, we tend to look for factors… Read More »
Asset Allocation Weekly (July 21, 2017)
by Asset Allocation Committee In the past few years, we have generally avoided allocations to non-U.S. markets for our asset allocation portfolios due to two primary concerns. First, the dollar was rising as a result of an improving U.S. economy and policy divergences between the U.S. and the rest of the world. The Federal Reserve was… Read More »