COUNTERPOINT AUGUST 2020
Asynchronous paths
The world economy is recovering – but at different speeds. China is leading the way and activity in Europe is picking up, but the US is suffering a temporary setback
Scroll down
Bill Street
Group Chief Investment Officer
The coronavirus pandemic continues to cast a shadow over the world and is likely to continue doing so until there’s a vaccine to protect us against the disease. Yet the economy is reopening and the recovery is gaining momentum. We’re particularly encouraged by the announcement of the European Union’s EUR 750 billion recovery fund.
At Quintet we’ve been focussing on our sustainable agenda and, as part of Plastic Free July, we have committed to eliminating all plastic consumable products from our 50-city network by the end of the year. You can read more about reducing single use-plastics here, in our article discussing a plastic-free future with Daniel Webb, founder of the Every Day Plastic project.
Welcome
NO GOING BACK
Some aspects of our lives may never return to the way they were
Top chart
CHARTING NEW
TERRITORY
Europeans are venturing back out, but Americans have become more cautious
Google has recently started to publish aggregated, anonymised data showing how people’s movements have changed throughout the pandemic. We’ve been monitoring the indices for retail & recreation and transit
stations as a real-time guide to how the recovery is progressing. The latest report suggests economic activity is picking up in Europe, where infection rates are low, but stalling in the US as targeted lockdowns return.
Investment focus
FAIR WINDS
Europe gets a tailwind in the form of more fiscal stimulus. Will the US follow suit?
"The European recovery fund is a game-changer"
The asset
allocation vector
Click an asset class to show the sub-asset classes
Quintet portfolio
A SUPPORTIVE ENVIRONMENT
We remain confident about the outlook for investment returns over the long term
The strategy behind our model portfolio has not changed over the past month and we believe the current balance of traditional and alternative investments is appropriate for the economic environment. That includes overweight allocations to equities, in particular the technology and healthcare sectors in the US, as well as selective emerging markets. We also see potential
in some sectors of the corporate bond
market, specifically euro high yield and emerging market debt denominated in hard currencies. To offset various risks, we include assets that have historically been more stable during periods of market stress, including gold, US Treasuries and the Japanese yen. We have an underweight allocation to European government bonds and UK gilts, which look unattractive at today’s prices.
Monitor
WHAT TO LOOK
OUT FOR
While the global health crisis remains the most important issue, the upcoming US presidential election and ongoing global trade tensions are risks.
Copyright © Quintet Private Bank (Europe) S.A. 2020. All rights reserved. Privacy Statement
Back to top
MONETARY Global central banks
FISCAL Next US fiscal package (Q3)
FISCAL EU Recovery Fund
MEDICAL Search for vaccine
POLITICAL US Presidential election (Nov)
TRADE UK–EU trade negotiations (Oct/Dec)
TRADE US–China trade tensions
Counterpoint July 2020
WE TAKE TIME TO LISTEN
This is the first edition of our monthly update. Please contact us if you have any questions, remarks or suggestions regarding this update.
Invest in a richer life,
however you define it.
This document has been prepared by Quintet Private Bank (Europe) S.A. The statements and views expressed in this document based upon information from sources believed to be reliable – are those of Quintet Private Bank (Europe) S.A. as of 27 July, 2020 and are subject to change. This information is defined as non-independent research because it has not been prepared in accordance with the legal requirements designed to promote the independence of investment research, including any prohibition on dealing ahead of the dissemination of this information. This document is of a general nature and does not constitute legal, accounting, tax or investment advice. This document does not provide any individual investment advice and an investment decision must not be based merely on the information and data contained in the document. All investors should keep in mind that past performance is no indication of future performance, and that the value of investments may go up or down. Changes in exchange rates may also cause the value of underlying investments to go up or down.
The way in which each country responded at the start of the coronavirus crisis is influencing its ability to recover. Those that introduced strict lockdown measures are finding they are able to reopen their economies and contain the virus, including China and Europe. In contrast, many of those that didn’t are suffering from a sharp increase in new infections and their recoveries are faltering.
China has returned to growth. It has all but eliminated Covid-19 since February, which has allowed the economy to get back into gear. Although Europe has lagged so far, its economy is also shifting up a gear and should catch up further. We believe the recently announced European recovery fund is a game-changer for the region.
Source: Google Mobility Index for Retail & Recreation and Transit Stations categories, as of July 21st
(Euro area = GDP-weighted average of Germany, France, Italy and Spain)
Google Mobility Index (7-Day Moving Average)
Welcome
Top chart
Investment focus
Portfolio
Monitor
Welcome
Top chart
Investment focus
Portfolio
Monitor
COUNTERPOINT AUGUST 2020
Asynchronous paths
The world economy is recovering – but at different speeds. China is leading the way and activity in Europe is picking up, but the US is suffering a temporary setback
The coronavirus pandemic continues to cast a shadow over the world and is likely to continue doing so until there’s a vaccine to protect us against the disease. Yet the economy is reopening and the recovery is gaining momentum. We’re particularly encouraged by the announcement of the European Union’s EUR 750 billion recovery fund.
At Quintet we’ve been focussing on our sustainable agenda and, as part of Plastic Free July, we have committed to eliminating all plastic consumable products from our 50-city network by the end of the year. You can read more about reducing single use-plastics here, in our article discussing a plastic-free future with Daniel Webb, founder of the Every Day Plastic project.
Google has recently started to publish aggregated, anonymised data showing how people’s movements have changed throughout the pandemic. We’ve been monitoring the indices for retail & recreation and transit stations as a real-time guide to how the recovery is progressing. The latest report suggests economic activity is picking up in Europe, where infection rates are low, but stalling in the US as targeted lockdowns return.
The way in which each country responded at the start of the coronavirus crisis is influencing its ability to recover. Those that introduced strict lockdown measures are finding they are able to reopen their economies and contain the virus, including China and Europe. In contrast, many of those that didn’t are suffering from a sharp increase in new infections and their recoveries are faltering.
China has returned to growth. It has all but eliminated Covid-19 since February, which has allowed the economy to get back into gear. Although Europe has lagged so far, its economy is also shifting up a gear and should catch up further. We believe the recently announced European recovery fund is a game-changer for the region.
"The European recovery fund is a game-changer"
In contrast, the US has hit a speedbump. Some US states have had to reimpose many of the curbs they had only recently lifted to control the spread of the virus. The early lifting of lockdown measures had resulted in businesses reopening and people returning to work. A recent fall in consumer activity is likely to reinforce the case for extra fiscal stimulus and we expect a new package to be announced over the summer.
We’re watching three key dimensions to help us determine the speed of the economic recovery – corporate activity, consumer spending and the spread of Covid-19. Government rescue packages and central bank stimulus measures have already done much to help businesses and workers through the crisis, and their ongoing support is crucial for the recovery to continue.
The strategy behind our model portfolio has not changed over the past month and we believe the current balance of traditional and alternative investments is appropriate for the economic environment. That includes overweight allocations to equities, in particular the technology and healthcare sectors in the US, as well as selective emerging markets.
We also see potential in some sectors of the corporate bond market, specifically euro high yield and emerging market debt denominated in hard currencies. To offset various risks, we include assets that have historically been more stable during periods of market stress, including gold, US Treasuries and the Japanese yen. We have an underweight allocation to European government bonds and UK gilts, which look unattractive at today’s prices.
MONETARY
Global central banks
FISCAL
Next US fiscal package (Q3)
FISCAL
EU Recovery Fund
MEDICAL
Search for vaccine
POLITICAL
US Presidential election (Nov)
Back to top
Copyright © Quintet Private Bank (Europe) S.A. 2020. All rights reserved. Privacy Statement
Invest in a richer life,
however you define it.
This document has been prepared by Quintet Private Bank (Europe) S.A. The statements and views expressed in this document based upon information from sources believed to be reliable – are those of Quintet Private Bank (Europe) S.A. as of 27 July, 2020 and are subject to change. This information is defined as non-independent research because it has not been prepared in accordance with the legal requirements designed to promote the independence of investment research, including any prohibition on dealing ahead of the dissemination of this information. This document is of a general nature and does not constitute legal, accounting, tax or investment advice. This document does not provide any individual investment advice and an investment decision must not be based merely on the information and data contained in the document. All investors should keep in mind that past performance is no indication of future performance, and that the value of investments may go up or down. Changes in exchange rates may also cause the value of underlying investments to go up or down.
TRADE
UK–EU trade negotiations (Oct/Dec)
TRADE
US–China trade tensions
Welcome
Top chart
Investment focus
Portfolio
Monitor
Welcome
NO GOING BACK
Some aspects of our lives may never return to the way they were
Bill Street
Group Chief Investment Officer
Top chart
CHARTING NEW
TERRITORY
Europeans are venturing back out, but Americans have become more cautious
Source: Google Mobility Index for Retail & Recreation and Transit Stations categories, as of July 21st
(Euro area = GDP-weighted average of Germany, France, Italy and Spain)
Google Mobility Index (7-Day Moving Average)
Investment focus
FAIR WINDS
Europe gets a tailwind in the form of more fiscal stimulus. Will the US follow suit?
Quintet portfolio
A SUPPORTIVE ENVIRONMENT
We remain confident about the outlook for investment returns
Monitor
WHAT TO LOOK
OUT FOR
While the global health crisis remains the most important issue, the upcoming US presidential election and ongoing global trade tensions are risks.
Counterpoint July 2020
WE TAKE TIME TO LISTEN
This is the first edition of our monthly update. Please contact us if you have any questions, remarks or suggestions regarding this update.
Our asset allocation vector explained
The asset allocation vector reflects the evolving investment environment by specifying adjustments relative to a portfolio’s benchmark weights
How to interpret the vector
A positive view means that we see more value in an asset class or sub-asset class and hold more than the benchmark allocation (overweight). A negative view means we hold less than the benchmark allocation (underweight). The sum of the weights across all asset classes is zero – if you increase in one area you need to decrease in another. Overall, relative to our EUR balanced benchmark we currently hold 7% less of the portfolio in fixed income and instead hold 4% more in equities and 3% more in alternatives.
The view of each asset class is made up of sub-asset class views. Although we are negative on fixed income overall (-7%) there are areas where we see potential, such as Euro High Yield (+3%). The sum of the sub-asset class adjustments for each asset class represents the total asset class adjustment.
The specific numerical weights given here relate to a EUR balanced portfolio and can be adjusted for different profiles.