Asset Allocation Reports
Asset Allocation Weekly (June 12, 2020)
by Asset Allocation Committee Although gold is the primary precious metal for investors, platinum, palladium and silver also can fulfill that role. Complicating matters is that these three metals are dual-use products. Unlike gold, which has few uses outside of monetary (store of value) purposes and jewelry, these other three have industrial uses as well. About… Read More »
Asset Allocation Weekly (June 5, 2020)
by Asset Allocation Committee Last week, we discussed how equity markets, because of their anticipatory nature, tend to bottom in advance of the end of recessions. Assuming that condition continues, if our expectations for a short recession (but probably a long recovery) are correct, it would make sense that the equity market would have already bottomed. … Read More »
Asset Allocation Weekly (May 29, 2020)
by Asset Allocation Committee The recent strong rally in equities has befuddled investors—how can equities rally with such vigor when the economy is historically weak? We suspect there are two reasons for this recovery: Although the drop in economic activity is deep, it will likely be short. Supportive monetary policy is a powerful elixir for equities.… Read More »
Asset Allocation Weekly (May 22, 2020)
by Asset Allocation Committee Beginning in the late 1990s and becoming an even bigger issue after Dodd-Frank regulations were imposed following the Great Recession, many market participants worried that bond market liquidity would be absent in the face of a crisis. Strict regulations discouraged banks and brokerage firms from holding large inventories of corporate bonds, thereby… Read More »
Asset Allocation Weekly (May 15, 2020)
by Asset Allocation Committee As the Federal Reserve expands its balance sheet and the federal deficit balloons, there is a legitimate concern about the potential for inflation. In this week’s report, we will examine inflation from a theoretical perspective. There are two simple tools we use to discuss inflation, the equation of exchange and the intersection… Read More »
Asset Allocation Weekly (May 8, 2020)
by Asset Allocation Committee The U.S. economy has been hit with shelter-in-place orders that have depressed consumption and reduced production. The economic readings on Q2 will be historically bad, perhaps even worse than the Great Depression. However, based on the assumptions that (a) aggressive policy support will continue, and (b) the pandemic will wane over time,… Read More »
Asset Allocation Weekly (May 1, 2020)
by Asset Allocation Committee The policy response to COVID-19 has been mostly favorable for gold. Our gold model uses the balance sheets of the Federal Reserve and the European Central Bank, the EUR/USD exchange rate, and the real two-year T-note yield. The only variable that has been bearish for gold is the dollar, but the massive… Read More »
Asset Allocation Weekly (April 24, 2020)
by Asset Allocation Committee As the COVID-19 pandemic continues to evolve, we are watching to see how the disease will affect the economy longer term. Of course, projections of this sort are highly probabilistic; factors could and will likely emerge that could render these projections irrelevant. At the same, ignoring potential long-term consequences of the virus… Read More »
Asset Allocation Weekly (April 17, 2020)
by Asset Allocation Committee The Federal Reserve’s aggressive expansion of its balance sheet has been in response to fears of systemic risk. The experience of the 2008 Great Financial Crisis has made it clear that systemic risk can occur from a myriad of different parts of the financial system, so the Fed has broadened its support… Read More »