This website uses cookies

We use functional and analytical cookies to improve our website. In addition, third parties place tracking cookies to display personalised advertisements on social media. By clicking accept you consent to the placement of these cookies.

middle banner focus
logo

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 17 June 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

Counterpoint July 2021

WE TAKE TIME TO LISTEN

Thank you for reading our monthly update. Please contact us if you have any questions, remarks or suggestions regarding this update.

down.png (copy)

TRADE Geopolitical tensions (ongoing)

MACRO Input shortages (ongoing)

New image (copy)

MACRO 
Reopening plans

up.png (copy)

FISCAL EU
recovery fund (Q3)

MONETARY Global central banks (ongoing)

FISCAL US infrastructure spending (H2)

MEDICAL Covid-19 vaccine (ongoing)

New image (copy)

MACRO Inflation and bond yields (ongoing)

New image (copy)

A strong recovery rally has already driven risky asset prices substantially higher from their 2020 lows. Yet the environment should support further gains from equities and higher-risk bonds.

We’re remaining overweight in US and UK small cap stocks, which should benefit from strong earnings growth, as well as Asian high yield and emerging market bonds, which are supported by attractive carry.

US dollar-denominated bonds offer advantages over euro bonds and we’re maintaining our overweight position.

The main risks to our outlook include a sudden cooling of economic and corporate earnings growth as well as potential policy mistakes.

Quintet portfolio

Positioned for the recovery

We’ve made no recent asset allocation changes, with portfolios positioned to capture sectors and regions that should do well as the recovery continues

icon
N
arrow up (copy)
arrow down (copy)
EQUITIES
FIXED INCOME
ALTERNATIVES
FX
4.0
0.0
-4.0
0.0

Click an asset class to show the sub-asset classes

The asset allocation vector

New image

Leading indicators continue to point to strong growth to close economic slack, with laggards such as the euro area starting to catch up

The Covid-19 pandemic is receding in the US, UK and euro area, where the daily rate of new cases has fallen to below 10 people per 100,000. New variants could throw the recovery off course, and the UK’s infection trend has turned higher recently. However, the vaccines appear to be resistant to these mutations and widespread vaccination programmes suggest further lockdown measures will be unnecessary – even if removing them fully is delayed.

As economies reopen, mobility is picking up rapidly, and both the UK and the rest of Europe are catching up with the US. The improvement is triggering a sharp pickup in discretionary consumer spending, supported by policy stimulus. The purchasing managers’ indices for services is now recovering strongly and manufacturing activity is also picking up. Despite supply bottlenecks in some sectors, ample spare capacity in the overall economy points to improvement ahead.

US wages have picked up recently, but the increase is slowing as jobseekers re-enter the market. Low-skilled workers are in short supply because people are still worried about catching the virus and can command a higher premium. For example, there are reports that Amazon is paying sign-on bonuses of up to USD 1,000 in many locations. As the vaccination programme progresses, the economy reopens further and government subsidies are discontinued, these shortages should ease and pay pressure diminish.

Top chart

Wages are holding steady

The fact that wage growth isn’t spiking suggests the inflation spike is going to be temporary

icon

Source: Quintet, Atlanta Fed Wage Tracker

Bill Street
Group Chief Investment Officer

autograph

The 2020 European Football Championship has kicked off and even though it’s taking place a year later than planned, the crowds are back. It’s just one of the signs that vaccination programmes are working, lockdowns measures are easing and our economies are reopening for business. The final stage of recovery is often the hardest and we’re likely to have to wait a bit longer before all the restrictions are removed.

Financial markets could become more volatile if investors worry that strong economic data and inflation spikes will encourage central banks to change their policies. Yet we’re more optimistic and believe they will continue to support the recovery. You can read about our long-term outlook in our Counterpoint 2021 Mid-Year Update or watch a replay of our recent client webinar.

Bill street image

A summer of sport is evidence that the end of the pandemic is at last in sight

Getting over the line

Welcome

icon

Scroll down

icon1 icon2 icon3 icon4 icon5

COUNTERPOINT JULY 2021

Open for business

The economic recovery is gathering momentum, with consumers and businesses unleashing pent-up demand

Logo

COUNTERPOINT 
JULY 2021

Open for business

Logo

The economic recovery is gathering momentum, with consumers and businesses unleashing pent-up demand

The 2020 European Football Championship has kicked off and even though it’s taking place a year later than planned, the crowds are back. It’s just one of the signs that vaccination programmes are working, lockdowns measures are easing and our economies are reopening for business. The final stage of recovery is often the hardest and we’re likely to have to wait a bit longer before all the restrictions are removed.

Financial markets could become more volatile if investors worry that strong economic data and inflation spikes will encourage central banks to change their policies. Yet we’re more optimistic and believe they will continue to support the recovery. You can read about our long-term outlook in our Counterpoint 2021 Mid-Year Update or watch a replay of our recent client webinar.

US wages have picked up recently, but the increase is slowing as jobseekers re-enter the market. Low-skilled workers are in short supply because people are still worried about catching the virus and can command a higher premium. For example, there are reports that Amazon is paying sign-on bonuses of up to USD 1,000 in many locations. As the vaccination programme progresses, the economy reopens further and government subsidies are discontinued, these shortages should ease and pay pressure diminish.

middle_banner_mobile.jpg

The Covid-19 pandemic is receding in the US, UK and euro area, where the daily rate of new cases has fallen to below 10 people per 100,000. New variants could throw the recovery off course, and the UK’s infection trend has turned higher recently. However, the vaccines appear to be resistant to these mutations and widespread vaccination programmes suggest further lockdown measures will be unnecessary – even if removing them fully is delayed.

As economies reopen, mobility is picking up rapidly, and both the UK and the rest of Europe are catching up with the US. The improvement is triggering a sharp pickup in discretionary consumer spending, supported by policy stimulus. The purchasing managers’ indices for services is now recovering strongly and manufacturing activity is also picking up. Despite supply bottlenecks in some sectors, ample spare capacity in the overall economy points to improvement ahead.

New image

Leading indicators continue to point to strong growth to close economic slack, with laggards such as the euro area starting to catch up

A fleeting phenomenon
A handful of categories are seeing outsized price gains, which is driving overall inflation higher. They include goods and services that are suffering from supply shortages (such as cars) and those which were hit very hard during the pandemic (such as airfares). We expect demand to return gradually to its pre-pandemic level and bottlenecks to ease, resulting in more moderate price increases over the second half of the year.

There has been some concern that central banks could remove their support if inflation picks up further. More recently, investors appear to be confident that it will be a temporary spike and bond markets have settled down. There has been a general improvement in sentiment as economies around the world continue to reopen. The good news has propelled stock markets in the US and Europe to new highs, and opportunities for further price appreciation remain.

A strong recovery rally has already driven risky asset prices substantially higher from their 2020 lows. Yet the environment should support further gains from equities and higher-risk bonds.

We’re remaining overweight in US and UK small cap stocks, which should benefit from strong earnings growth, as well as Asian high yield and emerging market bonds, which are supported by attractive carry.

US dollar-denominated bonds offer advantages over euro bonds and we’re maintaining our overweight position.

The main risks to our outlook include a sudden cooling of economic and corporate earnings growth as well as potential policy mistakes.

logo

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 17 June 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

AAT new - Start

Welcome

Getting over the line

icon

A summer of sport is evidence that the end of the pandemic is at last in sight

Bill street image autograph

Bill Street
Group Chief Investment Officer

icon

Top chart

Wages are holding steady

The fact that wage growth isn’t spiking suggests the inflation spike is going to be temporary

Source: Quintet, Atlanta Fed Wage Tracker

Swipe to see the full graph

mobile-chart
icon

Investment focus

Back to life, back to reality

Widespread vaccination programmes are allowing our economies to reopen more fully

icon

Quintet portfolio

Positioned for the recovery

We’ve made no recent asset allocation changes, with portfolios positioned to capture sectors and regions that should do well as the recovery continues

icon

Monitor

WHAT TO LOOK
OUT FOR

While the global health crisis remains a key issue, Covid-19 vaccination programmes are accelerating, reopening is happening, policy easing continues, inflation is picking up temporarily and bond yields are rising somewhat

Outlook is more certain than last month

down.png (copy)

Outlook is less certain than last month

down.png

Counterpoint July 2021

WE TAKE TIME TO LISTEN

Thank you for reading our monthly update. Please contact us if you have any questions, remarks or suggestions regarding this update.

Click an asset class to show the sub-asset classes

The asset allocation vector

More on our views

When we increase the allocation to one asset class in portfolios, we have to decrease the allocation to another. That’s why our tactical asset allocation (TAA) decisions come in pairs, where we underweight and overweight relative to our strategic asset allocation (SAA) weightings. The specific numerical weights from the chart relate to a EUR balanced portfolio and can be adjusted for different profiles.

US equities / US investment grade bonds
Given our positive outlook, we believe US stocks can outperform low-yielding US investment grade bonds at this stage of the business cycle.

UK small cap / Global equities
UK small caps lagged in the recovery and valuations are more attractive than for global equities, while its cyclical sector composition is supportive as growth recovers.

Asian high yield bonds / US investment grade bonds
Asian high yield bonds offer significant additional yield over US investment grade bonds, and default risks are well compensated for.

Global equities / European government bonds
As the business cycle progresses supportive factors for equities stay in place, including growth in global corporate earnings, market momentum and monetary and fiscal support.

Emerging market sovereign debt / US investment grade bonds
Emerging market sovereign debt offers additional yield over US investment grade bonds. A weaker US dollar and rising oil prices would be likely drivers of tighter spreads.

US Treasuries / Eurozone government bonds
We have higher conviction in US Treasuries as a diversifier than in European government bonds thanks to their higher yield to maturity and better credit quality.

US Investment grade bonds  / Eurozone government bonds
The rise in USD yields makes currency-hedged USD bonds better value than European government bonds for EUR-based investors.

MACRO 
Reopening plans

up.png (copy)

FISCAL EU
recovery fund (Q3)

FISCAL US
infrastructure spending (H2)

MONETARY
Global central banks (ongoing)

MEDICAL
Covid-19 vaccine (ongoing)

New image (copy)

MACRO
Inflation and bond yields (ongoing)

New image (copy)
down.png (copy)

TRADE
Geopolitical tensions (ongoing)

MACRO
Input shortages (ongoing)

New image (copy)

Seeing the world differently

Quintet’s Chief Investment Office share their views on the economy, markets and investing in our monthly Counterpoint publication.
Fullscreen