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 (August 5, 2016)
by Asset Allocation Committee Last week’s GDP data for Q2 came in below expectations, rising 1.2%. Consumption was robust, accounting for 2.8% of GDP growth, but investment reduced growth by 1.7% and government peeled 0.2% from output. Net exports added 0.2% to GDP, but we would not be surprised to see the sector revised downward due… Read More »
Asset Allocation Weekly (July 29, 2016)
by Asset Allocation Committee In the most recent rebalance of our Asset Allocation portfolios, we maintained an allocation to emerging market equities in the Aggressive Growth portfolio. As we have noted in the past, there is a positive relationship between the dollar’s exchange rate and the relative performance of developed market equities and emerging market equities.… Read More »
Asset Allocation Weekly (July 22, 2016)
by Asset Allocation Committee In the most recent rebalance of our Asset Allocation portfolios, we introduced positions in gold. Although the yellow metal is classified as a commodity, we view it more as a currency, admittedly one that is not backed by liabilities. National fiat currencies are generally created in the credit process and are backed… Read More »
Asset Allocation Weekly (July 15, 2016)
by Asset Allocation Committee Since the recovery began, we have consistently favored duration in fixed income. Our position has been that growth would remain sluggish in the developed world and global overcapacity would keep inflation contained. The consensus of strategists and economists didn’t support our position. This chart shows the path of the 10-year T-note yield… Read More »
Asset Allocation Weekly (July 8, 2016)
by Asset Allocation Committee One of the great characteristics about working in financial services is that there are always surprises. Recently, we came across a situation in the S&P earnings data that we had not noticed before. It is well known that earnings have two variations—as reported and operating. As reported earnings include all costs. Thus,… Read More »
Asset Allocation Weekly (July 1, 2016)
by Asset Allocation Committee The Brexit situation is dominating the financial news, and rightly so—such events are unusual and their outcomes are usually uncertain. As part of our asset allocation process, we examine these types of issues and adjust our portfolios to account for them. Although our process is cyclical, meaning we pay particular attention to… Read More »
Asset Allocation Weekly (June 24, 2016)
by Asset Allocation Committee Last week, St. Louis FRB President Bullard issued a position paper that represents a significant departure from what has been standard policy at the Federal Reserve. Our first hint that something had changed was noticed in the dots chart. First, there were two dots that indicated no change in policy in 2017… Read More »
Asset Allocation Weekly (June 17, 2016)
by Asset Allocation Committee Our asset allocation process has generally favored longer duration fixed income instruments. We have expected inflation to remain low due to continued globalization and deregulation. Over time, low inflation brings low long-term interest rates. In recent weeks, domestic long-term interest rates have declined significantly. Although this isn’t a huge surprise to us,… Read More »
Asset Allocation Weekly (June 10, 2016)
by Asset Allocation Committee In our asset allocation process, we focus on cyclical trends—trends that tend to have three- to five-year time horizons. Two examples of these sorts of trends are the business cycle and the monetary policy cycle. Although both cycles can last longer or less than three to five years, in general, these types… Read More »