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Invest in a richer life,
however you define it.

This document has been prepared by Quintet Private Bank (Europe) S.A. This document 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 or tax 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 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 23 October, 2020 and are subject to change.



Copyright © Quintet Private Bank (Europe) S.A. 2020.
All rights reserved. Privacy Statement

Counterpoint November 2020

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.

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TRADE UK–EU trade negotiations

TRADE US–China trade tensions 

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POLITICAL US Presidential election

MEDICAL Search for a vaccine 

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FISCAL EU Recovery Fund (Q4)

FISCAL Next US fiscal package (Q4 / H1 2021)

MONETARY Global central banks 

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Last month we dialled down risk in portfolios to reflect slowing economic growth, heightened political risk and reduced visibility about the immediate outlook for markets. This change included reducing our overweight allocation to US equities to neutral, and closing our diversifying position in the Japanese yen. This month we’re waiting for more clarity about the timing of the recovery and holding steady. Although the US election is likely to dominate the news for the next few weeks, we’re looking ahead.

We’ve positioned portfolios for this early stage of the business cycle, where conditions are still challenging but look set to improve. Our strategy includes an overweight allocation to equities, specifically emerging markets equities. Within fixed income, we are overweight Europe’s high yield markets and emerging market bonds denominated in hard currencies. We combine this exposure with diversifying assets. These positions include investments in US government bonds and gold.

Quintet portfolio

HOLDING STEADY

We’re optimistic that the economy can recover, but waiting patiently for more clarity about timing

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N
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EQUITIES
FIXED INCOME
ALTERNATIVES
FX
CASH
2.0
3.0
-5.0
0.0
0.0

Click an asset class to show the sub-asset classes

The asset allocation vector

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"A Democratic clean sweep could have profound macro and sector implications"

On 3 November the American people will decide whether or not Trump will lose the presidency and many are concerned about the financial implications. Markets can experience an increase in volatility immediately around important political events. That said, historically, the macroeconomic backdrop has been a better predictor of market performance than the winning party over a three month horizon, so it’s important to consider the broader environment.

In the short term, economic activity around the world looks set to slow, as some countries are reapplying tight restrictions to counter a rise in Covid-19 infections. Although many of these measures are local rather than national, consumer spending and business confidence are likely to fall as a result. Yet, we continue to believe this setback is just temporary and that the recovery will gather speed next year.

favourite. However, the odds of the Democrats winning not just the White House but both houses of Congress as well, in a so called “clean sweep”, stand at just above 50%.

Despite the sophisticated statistical methodology behind voter polling, betting odds are often an accurate indicator of electoral outcomes. As the chart shows, since pulling away in September, Joe Biden has built a substantial lead and stands as 2:1

Top chart

PLACE YOUR BETS

The odds are on a Biden victory, but can the Democrats make a clean sweep?

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Source: Quintet, RCP, PredictIt, Bloomberg

Bill Street
Group Chief Investment Officer

The nights are drawing in and the clocks have changed, making already short days seem even shorter. With the US election looming, Brexit negotiations ongoing and new restrictions for many, there’s a growing sense that things are probably going to get worse over the next few months.

Although we face short-term challenges, it’s not all bad news. Economic activity is likely to slow over the final quarter of 2020 but medical capacity has increased, vaccines are being tested and as political uncertainties resolve, the economy can recover with ongoing fiscal and monetary support.

As investors we must look forwards, always managing risks and assessing where we are in the economic cycle. We also believe it’s necessary to boldly envision the future to identify the trends that will transform our world. Last week we unveiled our new framework for assessing long-term themes. Learn more by watching the introductory clip below.

autograph Bill street image

The nights are drawing in but we’re looking to the future

CHANGE AND CONTINUITY

Welcome

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Scroll down

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COUNTERPOINT NOVEMBER 2020

Beyond the US election

With all eyes on the US presidential election, what can we expect following the result?

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COUNTERPOINT
NOVEMBER 2020

Beyond the US election

Logo

The nights are drawing in and the clocks have changed, making already short days seem even shorter. With the US election looming, Brexit negotiations ongoing and new restrictions for many, there’s a growing sense that things are probably going to get worse over the next few months.

Although we face short-term challenges, it’s not all bad news. Economic activity is likely to slow over the final quarter of 2020 but medical capacity has increased, vaccines are being tested and as political uncertainties resolve, the economy can recover with ongoing fiscal and monetary support.

As investors we must look forwards, always managing risks and assessing where we are in the economic cycle. We also believe it’s necessary to boldly envision the future to identify the trends that will transform our world. Last week we unveiled our new framework for assessing long-term themes. Learn more by watching the introductory clip below.

Despite the sophisticated statistical methodology behind voter polling, betting odds are often an accurate indicator of electoral outcomes. As the chart shows, since pulling away in September, Joe Biden has built a substantial lead and stands as 2:1 favourite. However, the odds of the Democrats winning not just the White House but both houses of Congress as well, in a so called “clean sweep”, stand at just above 50%.

middle_banner_mobile.jpg

On 3 November the American people will decide whether or not Trump will lose the presidency and many are concerned about the financial implications. Markets can experience an increase in volatility immediately around important political events. That said, historically, the macroeconomic backdrop has been a better predictor of market performance than the winning party over a three month horizon, so it’s important to consider the broader environment.

In the short term, economic activity around the world looks set to slow, as some countries are reapplying tight restrictions to counter a rise in Covid-19 infections. Although many of these measures are local rather than national, consumer spending and business confidence are likely to fall as a result. Yet, we continue to believe this setback is just temporary and that the recovery will gather speed next year.

New image

"A Democratic clean sweep could have profound macro and sector implications"

Governments and central banks continue to provide substantial fiscal and monetary stimulus and are committed to doing whatever it takes to support their economies. Health and social systems are improving all the time and becoming more effective at treating the virus. As a result, economies are adapting and should continue to reopen even before a vaccine is rolled out.

Looking to next year and beyond, markets can be influenced by the party of the presidency. Here, the possibility that the Democrats will win both house of Congress as well as the White House is important. Unified governments are able to create more legislation and laws that are more significant than divided governments. A Democratic clean sweep would probably be good news for the economy overall and some sectors such as infrastructure and healthcare, but could pose a headwind for others, including pharmaceuticals, financials, energy and technology.

Last month we dialled down risk in portfolios to reflect slowing economic growth, heightened political risk and reduced visibility about the immediate outlook for markets. This change included reducing our overweight allocation to US equities to neutral, and closing our diversifying position in the Japanese yen. This month we’re waiting for more clarity about the timing of the recovery and holding steady. Although the US election is likely to dominate the news for the next few weeks, we’re looking ahead.

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TRADE
UK–EU trade negotiations

(Oct/Dec)

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TRADE
US–China trade tensions

New image

MEDICAL 
Search for vaccine 

POLITICAL
US Presidential election
(Nov)

MONETARY
Global central banks 

FISCAL
Next US fiscal package
(Q3 / H1 2021)

FISCAL
EU Recovery Fund
(Q3/Q4)

New image
logo

Invest in a richer life,
however you define it.

This document has been prepared by Quintet Private Bank (Europe) S.A. This document 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 or tax 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 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 23 October, 2020 and are subject to change.



Copyright © Quintet Private Bank (Europe) S.A. 2020.
All rights reserved. Privacy Statement

AAT new - Start

Welcome

CHANGE AND CONTINUITY

icon

The nights are drawing in but we’re looking to the future

Bill street image autograph

Bill Street
Group Chief Investment Officer

icon

Top chart

PLACE YOUR BETS

The odds are on a Biden victory, but can the Democrats make a clean sweep?

Source: Quintet, RCP, PredictIt, Bloomberg

Swipe to see the full graph

mobile-chart
icon

Investment focus

SEEING THROUGH THE UNCERTAINTY

No matter who wins, what can we anticipate?

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Quintet portfolio

HOLDING STEADY

We’re optimistic that the economy can recover, but waiting patiently for more clarity about timing

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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

Outlook is more certain than last month

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Outlook is less certain than last month

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Counterpoint November 2020

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.

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 5% less of the portfolio in fixed income and instead hold 2% 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 (-5%) 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.


Click an asset class to show the sub-asset classes

The asset allocation vector

We’ve positioned portfolios for this early stage of the business cycle, where conditions are still challenging but look set to improve. Our strategy includes an overweight allocation to equities, specifically emerging markets equities. Within fixed income, we are overweight Europe’s high yield markets and emerging market bonds denominated in hard currencies. We combine this exposure with diversifying assets. These positions include investments in US government bonds and gold.

Seeing the world differently

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