
MEDICAL Covid-19 vaccine (ongoing)
MONETARY Global central banks (ongoing)
FISCAL Biden’s first fiscal package (Q1)
FISCAL EU Recovery Fund (Q1)

MACRO Inflation is low but rising (ongoing)

MEDICAL Lockdowns (ongoing)
TRADE US–China trade tensions (ongoing)
TRADE Brexit impact (ongoing)
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Thank you for reading our monthly update. Please contact us if you have any questions, remarks or suggestions regarding this update.
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Counterpoint February 2021
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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 21 January 2021 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.
Copyright © Quintet Private Bank (Europe) S.A. 2021.
All rights reserved. Privacy Statement
Invest in a richer life,
however you define it.

The asset allocation vector
Click an asset class to show the sub-asset classes



We are overweighting asset classes that are playing catch up after underperforming during the pandemic
A positive outlook
Quintet portfolio
We also have an overweight allocation to emerging market equities. The composition of stock markets in these regions is attractive, with a relatively high exposure to technology and low exposure to ‘old economy’ sectors. Long-term growth expectations remain higher than for other markets, while earnings growth has bottomed. EM stocks currently show particularly strong positive momentum.
We have recently reduced our allocation to gold from overweight back to neutral. Following a strong run last year, we believe the price is unlikely to rise much higher from here. Lastly, we include US government bonds and Treasury inflation-protected securities as diversifying assets in our tactical allocation.
At the end of 2020 we dialled up risk in portfolios slightly to reflect our more positive outlook. The start of Covid-19 vaccination programmes and the fading of political uncertainty surrounding the US elections and Brexit have confirmed our confidence about the recovery. Although the winter lockdowns have put temporary brakes on growth, we’re maintaining our tactical risk-on stance.
Following the broad-based rally of risk assets from their 2020 lows, our focus will increasingly shift to asset classes that still offer the potential to catch up. They include UK small-cap stocks. We are also overweight US equities, which have compelling characteristics in terms of innovation, sector composition and higher profitability.
"We’ve increased our tactical risk exposure by adding an overweight in UK small caps against global equities"


Countries, sectors and businesses that have suffered the most throughout the pandemic should bounce back the strongest during the recovery
Mind the gap
COUNTERPOINT FEBRUARY 2021
Monitor
Portfolio
Investment focus
Top chart
Welcome






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Welcome
How we used to live
We’re now into the final stretch of the pandemic

Effective Covid-19 vaccines mean we can at last look forward to our lives returning to the way they used to be before the health crisis. Encouragingly, Norway has already become the first European country to begin relaxing the latest round of coronavirus restrictions. We’re confident the vaccination programmes will allow our economies to reopen as 2021 progresses and that there will be a strong bounce back.
The brighter outlook has already rippled across financial markets. We follow a rigorous research-based approach to uncover the regions, sectors and investment styles that have the most to gain during the recovery – which are the ones that have been hit the hardest by the pandemic. We continue to have an overweight allocation to selected risk assets in portfolios, which we think will perform well this year.
For an overview of all these themes have a look at our Counterpoint 2021.
Bill Street
Group Chief Investment Officer
Source: Quintet, Our World in Data

The end of the coronavirus crisis is now in sight
The vaccine engine
Top chart
Several countries started vaccinating their most vulnerable groups at the end of 2020. Although the programmes have been slow to get going, the number of people receiving the vaccine is growing steadily and the pace
is even accelerating in the UK and America. This trend should allow governments to relax lockdown measures in the spring, which in turn should reignite economic growth.
Read more
Although many countries have started 2021 with strict lockdown measures in place, the main difference from last year is that effective vaccines mean the economy is likely to begin reopening from this spring. Meanwhile, central banks are continuing to hold interest rates at record low levels to help governments fund their stimulus spending programmes. These debts will inevitably continue to rise, but the costs of servicing them should remain very low.
We’re expecting a strong deficit-financed fiscal boost to growth. As a result, those areas of the economy that have been particularly hard hit by the pandemic should bounce back more strongly during the recovery phase. They include more economically sensitive cyclical sectors, smaller businesses and some individual countries. As assets exposed to these areas close the relative valuation gap, they should outperform.
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In the middle of the pack
For example, UK equities underperformed global stock markets in 2020, with the uncertainty surrounding Brexit weighing on investor sentiment, in addition to the coronavirus pandemic. UK small-cap stocks lagged the rally substantially and we expect them to catch up over the coming months. They are trading at a significant discount to global markets, leaving plenty of room for share prices to rise.
The UK small-cap segment is more heavily weighted to sectors that stand to benefit most from the recovery – including industrials, consumer discretionary and real estate – than its global counterparts. Notably, most of these sectors are cheaper among UK small caps than abroad. The country’s recovery from the pandemic is likely to be in line with most other large economies, enabling cyclical small caps to catch up with global stocks. Fading Brexit uncertainty following the deal with the EU should help too.

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 21 January 2021 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.
Copyright © Quintet Private Bank (Europe) S.A. 2021.
All rights reserved. Privacy Statement
Invest in a richer life,
however you define it.

Back to top

FISCAL
EU Recovery Fund (Q1)
FISCAL
Biden’s first fiscal package (Q1)
MONETARY
Global central banks (ongoing)
MEDICAL
Covid-19 vaccine (ongoing)
MACRO
Inflation is low but rising (ongoing)

TRADE
US–China trade tensions (ongoing)
MEDICAL
Lockdowns (ongoing)
TRADE
Brexit impact (ongoing)

At the end of 2020 we dialled up risk in portfolios slightly to reflect our more positive outlook. The start of Covid-19 vaccination programmes and the fading of political uncertainty surrounding the US elections and Brexit have confirmed our confidence about the recovery. Although the winter lockdowns have put temporary brakes on growth, we’re maintaining our tactical risk-on stance.
Following the broad-based rally of risk assets from their 2020 lows, our focus will increasingly shift to asset classes that still offer the potential to catch up. They include UK small-cap stocks. We are also overweight US equities, which have compelling characteristics in terms of innovation, sector composition and higher profitability.
"We’ve increased our tactical risk exposure by adding an overweight in UK small caps against global equities"

Top chart

Although many countries have started 2021 with strict lockdown measures in place, the main difference from last year is that effective vaccines mean the economy is likely to begin reopening from this spring. Meanwhile, central banks are continuing to hold interest rates at record low levels to help governments fund their stimulus spending programmes. These debts will inevitably continue to rise, but the costs of servicing them should remain very low.
We’re expecting a strong deficit-financed fiscal boost to growth. As a result, those areas of the economy that have been particularly hard hit by the pandemic should bounce back more strongly during the recovery phase. They include more economically sensitive cyclical sectors, smaller businesses and some individual countries. As assets exposed to these areas close the relative valuation gap, they should outperform.

Several countries started vaccinating their most vulnerable groups at the end of 2020. Although the programmes have been slow to get going, the number of people receiving the vaccine is growing steadily and the pace is even accelerating in the UK and America. This trend should allow governments to relax lockdown measures in the spring, which in turn should reignite economic growth.
Effective Covid-19 vaccines mean we can at last look forward to our lives returning to the way they used to be before the health crisis. Encouragingly, Norway has already become the first European country to begin relaxing the latest round of coronavirus restrictions. We’re confident the vaccination programmes will allow our economies to reopen as 2021 progresses and that there will be a strong bounce back.
The brighter outlook has already rippled across financial markets. We follow a rigorous research-based approach to uncover the regions, sectors and investment styles that have the most to gain during the recovery – which are the ones that have been hit the hardest by the pandemic. We continue to have an overweight allocation to selected risk assets in portfolios, which we think will perform well this year.
For an overview of all these themes have a look at our Counterpoint 2021.
Countries, sectors and businesses that have suffered the most throughout the pandemic should bounce back the strongest during the recovery

Mind the gap
COUNTERPOINT FEBRUARY 2021
Welcome

Investment focus

We also have an overweight allocation to emerging market equities. The composition of stock markets in these regions is attractive, with a relatively high exposure to technology and low exposure to ‘old economy’ sectors. Long-term growth expectations remain higher than for other markets, while earnings growth has bottomed. EM stocks currently show particularly strong positive momentum.
We have recently reduced our allocation to gold from overweight back to neutral. Following a strong run last year, we believe the price is unlikely to rise much higher from here. Lastly, we include US government bonds and Treasury inflation-protected securities as diversifying assets in our tactical allocation.

Swipe to see the full graph
Source: Quintet, Our World in Data

The asset allocation vector
Click an asset class to show the sub-asset classes
The view of each asset class is made up of sub-asset class views. Although we are negative on fixed income overall (-4%), there are areas where we see potential, such as euro high yield (+3%).
The specific numerical weights given here relate to a EUR balanced portfolio and can be adjusted for different profiles.
How to interpret the vector
A positive view means we hold more than the benchmark allocation in an asset class or sub-asset class (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 SAA we currently hold 4% less of the portfolio in fixed income and instead hold 4% more in equities.
The tactical asset allocation vector reflects the evolving investment environment by specifying adjustments relative to a portfolio’s benchmark weights as defined by the strategic asset allocation (SAA)
Our asset allocation vector explained
Thank you for reading our monthly update. Please contact us if you have any questions, remarks or suggestions regarding this update.
WE TAKE TIME TO LISTEN
Counterpoint February 2021
While the global health crisis remains the most important issue, risks have receded now that the US election is over, Brexit seems less of an issue and Covid-19 vaccination programmes have started
WHAT TO LOOK
OUT FOR
Monitor

We are overweighting asset classes that are playing catch up after underperforming during the pandemic
A positive outlook
Quintet portfolio

We’re looking for assets that are well positioned to outperform other areas of the market as economic growth picks up
A healing process
Investment focus

The end of the coronavirus crisis is now in sight
The vaccine engine
Top chart

Portfolio

Bill Street
Group Chief Investment Officer

We’re now into the final stretch of the pandemic

How we used to live
Welcome

Monitor
