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 (May 12, 2017)
by Asset Allocation Committee Slow economic growth has plagued the West. Although the concern has been acute since the Great Financial Crisis (GFC), worries about slowing growth predated that event. Perhaps the most important factor contributing to sluggish growth has been tepid productivity growth. This chart shows the five-year change in productivity; we use this longer… Read More »
Asset Allocation Weekly (May 5, 2017)
by Asset Allocation Committee In our most recent quarterly asset allocation meetings, our analysis determined that emerging markets would not be added to the portfolios. Since this asset class has been this year’s best performer, some explanation is in order. One of the primary reasons we have refrained from adding emerging markets is the dollar’s strength.… Read More »
Asset Allocation Weekly (April 28, 2017)
by Asset Allocation Committee Last week, we discussed the impact of reducing the size of the Federal Reserve’s balance sheet on stocks and bonds. This week we will discuss the effects of QE on monetary policy. The FOMC dropped rates to near zero by January 2009. Although European central banks (including the ECB) have since taken… Read More »
Asset Allocation Weekly (April 21, 2017)
by Asset Allocation Committee Last week, we discussed the impact of reducing the size of the Federal Reserve’s balance sheet on the economy. This week we will discuss the effects of QE on financial markets. The relationship between the balance sheet and equities seems rather straightforward; expanding the balance sheet appears to be clearly supportive for… Read More »
Asset Allocation Weekly (April 13, 2017)
by Asset Allocation Committee The most recent Federal Reserve minutes indicated that the U.S. central bank is preparing to reverse its experiment with quantitative easing (QE) by reducing the size of its balance sheet. Although the eventual desire to reduce the size of the balance sheet is no real surprise, the timing was unclear. It now… Read More »
Asset Allocation Weekly (April 7, 2017)
by Asset Allocation Committee In our 2017 Outlook, our earnings forecast for the S&P 500 was $119.45 per share, up from $106.25 in 2016.[1] Based on new data and other trends, we are raising this forecast to $126.44 for this year. There are three reasons for the change. The spread between Thomson-Reuters and S&P operating earnings… Read More »
Asset Allocation Weekly (March 31, 2017)
by Asset Allocation Committee Historically, recessions tend to come from three sources—overly tight monetary policy, geopolitical events and inventory overhangs. The latter has mostly become irrelevant due to improved inventory management, leaving overly tight monetary policy and geopolitical events as the typical causes of downturns. As our regular readers know, we monitor both quite closely. One… Read More »
Asset Allocation Weekly (March 24, 2017)
by Asset Allocation Committee In a recent Bloomberg Surveillance podcast,[1] Sebastian Mallaby made an interesting observation about the recent Fed tightening. He noted how the asset markets mostly ignored or cheered the move. Mallaby suggested that this isn’t necessarily a good outcome, meaning that central bank tightening should not be welcomed by the financial markets. When… Read More »
Asset Allocation Weekly (March 17, 2017)
by Asset Allocation Committee The FOMC has moved on rates; as expected, the Fed lifted its target fed funds rate to a range between 75 bps and 100 bps. The projections are for a 1.50% rate by the end of 2017 and a 2.25% rate by the end of 2018. In this week’s report, we want… Read More »