

COUNTERPOINT OCTOBER 2020
Hitting a speed bump
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Bill Street
Group Chief Investment Officer
The pandemic has given us an opportunity to prove how quickly we can adapt. Working from home has its challenges, but what if you’d been training for an elite sporting event that was suddenly cancelled? We spoke to six Paralympians about how their lives changed as a result of the global health crisis. Read about their experiences here.
Members of my team, the Chief Investment Office, are located in Luxembourg, Belgium, Switzerland, Germany, the Netherlands, Spain and the UK. It has been a difficult year, but I’m proud of how we’ve worked together to adapt. The upcoming quarter presents challenges, but we see this as a speed bump – not a reason to despair. I hope you enjoy this month’s update.
Welcome
FASTER, HIGHER, STRONGER
The pandemic has forced us all to adapt and develop new skills
Top chart
FEELING UNSETTLED
The world is starting to feel more uncertain again
The World Uncertainty Index is based on the frequency that “uncertainty” appears in the media and country risk reports. Historically, increases have typically been associated with
higher market volatility and slower economic growth. Although lower than during the worst days of the Covid-19 pandemic, uncertainty is on the rise again.

Investment focus
THE PATH TO ESCAPE VELOCITY
After immediate uncertainties resolve the economy can recover


"Over time the balance of risk should improve"
The asset
allocation vector
Click an asset class to show the sub-asset classes

Quintet portfolio
UPDATE ALERT
We’ve repositioned portfolios to reflect the risks in the market

As long term investors with a positive outlook over the medium and long term, we maintain our ‘risk-on’ view. However, in order to reflect the immediate risks we have adjusted our tactical allocation.
The US, in particular, faces short term risks. The election is just over a month away and Covid-19 cases continue to rise. To address
this we have closed our overweight in US equities.
In order to preserve the balance of risk across our full portfolio, we have also closed our overweight allocation to the Japanese yen, a position we held as a portfolio diversifier. The yen remains undervalued, but we don’t believe there are catalysts that could push up the currency closer to its fair value any time soon.
Monitor
WHAT TO LOOK
OUT FOR
As we move into the fourth quarter uncertainty has increased
Outlook is less certain than last month

Outlook is more certain than last month


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 / H1 2021)

FISCAL EU Recovery Fund (Q3/Q4)


MEDICAL Search for vaccine
POLITICAL US Presidential election (Nov)



TRADE UK–EU trade negotiations (Oct/Dec)
TRADE US–China trade tensions
Counterpoint October 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.

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 28 September, 2020 and are subject to change.
We continue to believe the global economy will recover, with governments and central banks committed to supporting the healing process with stimulus measures and policies. Over time, the economy will reach escape velocity where the private sector will no longer rely on public support. Yet today significant uncertainties exist which will remain key challenges over the short term.
The rate of new infections has been rising in many regions, including parts of the US and Europe. Economic activity is likely to decelerate and could even contract in some regions as measures to slow the spread of Covid-19 are reintroduced. But governments hope to avoid full-scale lockdowns and, provided therapeutic progress continues, with ongoing support from governments, we expect that the pace of growth should pick up again early next year.
Source: Ahir, H, N Bloom, and D Furceri (2018), “World Uncertainty Index”, Stanford mimeo
(Quintet estimates for Q3 based on daily data from www.policyuncertainty.com)
x 1.000
Gulf War I
US recession and 9/11
Iraq war and outbreak of SARS
Financial credit crunch
Sovereign debt crisis in Europe
Fed tightening and political risk in Greece and Ukraine
US fiscal cliff and sovereign debt crisis in Europe
US elections
Coronavirus
US-China trade tensions and Brexit
Brexit

Welcome

Top chart

Investment focus

Portfolio

Monitor

Welcome
Top chart
Investment focus
Portfolio
Monitor
COUNTERPOINT OCTOBER 2020
Hitting a speed bump

The pandemic has given us an opportunity to prove how quickly we can adapt. Working from home has its challenges, but what if you’d been training for an elite sporting event that was suddenly cancelled? We spoke to six Paralympians about how their lives changed as a result of the global health crisis. Read about their experiences here.
Members of my team, the Chief Investment Office, are located in Luxembourg, Belgium, Switzerland, Germany, the Netherlands, Spain and the UK. It has been a difficult year, but I’m proud of how we’ve worked together to adapt. The upcoming quarter presents challenges, but we see this as a speed bump – not a reason to despair. I hope you enjoy this month’s update.
The World Uncertainty Index is based on the frequency that “uncertainty” appears in the media and country risk reports. Historically, increases have typically been associated with higher market volatility and slower economic growth. Although lower than during the worst days of the Covid-19 pandemic, uncertainty is on the rise again.

We continue to believe the global economy will recover, with governments and central banks committed to supporting the healing process with stimulus measures and policies. Over time, the economy will reach escape velocity where the private sector will no longer rely on public support. Yet today significant uncertainties exist which will remain key challenges over the short term.
The rate of new infections has been rising in many regions, including parts of the US and Europe. Economic activity is likely to decelerate and could even contract in some regions as measures to slow the spread of Covid-19 are reintroduced. But governments hope to avoid full-scale lockdowns and, provided therapeutic progress continues, with ongoing support from governments, we expect that the pace of growth should pick up again early next year.

"Over time the balance of risk should improve"
We’re also heading into a period where there’s a lot of political uncertainty. Although Joe Biden is ahead in the US presidential election polls, recent history reminds us that the unexpected is not impossible. Meanwhile, the UK is scheduled to leave the European Union on 31 December.
We believe the recovery should gain momentum in early 2021 provided therapeutics get better and lockdowns relax once again. Regardless of who wins the US elections, the Democrats and Republicans should have breathing space to agree a new rescue package. Meanwhile, although Brexit is an extra source of uncertainty for the time being, both sides will at last be able to move on with their new lives once the process is resolved.
Over time the balance of risk should improve. Ultimately, underlying structural forces on the economy, such as the transition from physical to digital, are expected to continue to change the economy and drive growth over the longer term.
As long term investors with a positive outlook over the medium and long term, we maintain our ‘risk-on’ view. However, in order to reflect the immediate risks we have adjusted our tactical allocation.
The US, in particular, faces short term risks. The election is just over a month away and Covid-19 cases continue to rise. To address this we have closed our overweight in US equities.
In order to preserve the balance of risk across our full portfolio, we have also closed our overweight allocation to the Japanese yen, a position we held as a portfolio diversifier. The yen remains undervalued, but we don’t believe there are catalysts that could push up the currency closer to its fair value any time soon.
MONETARY
Global central banks
FISCAL
Next US fiscal package
(Q3 / H1 2021)

FISCAL
EU Recovery Fund
(Q3/Q4)



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. 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 28 September, 2020 and are subject to change.


TRADE
UK–EU trade negotiations
(Oct/Dec)

TRADE
US–China trade tensions

Welcome

Top chart

Investment focus

Portfolio

Monitor

Welcome
FASTER, HIGHER, STRONGER

The pandemic has forced us all to adapt and develop new skills

Bill Street
Group Chief Investment Officer

Top chart
FEELING UNSETTLED
The world is starting to feel more uncertain again
Source: Ahir, H, N Bloom, and D Furceri (2018), “World Uncertainty Index”, Stanford mimeo
(Quintet estimates for Q3 based on daily data from www.policyuncertainty.com)
Swipe to see the full graph


Investment focus
THE PATH TO ESCAPE VELOCITY
After immediate uncertainties resolve the economy can recover

Quintet portfolio
UPDATE ALERT
We’ve repositioned portfolios to reflect the risks in the market

Monitor
WHAT TO LOOK
OUT FOR
As we move into the fourth quarter uncertainty has increased
Outlook is more certain than last month

Outlook is less certain than last month

Counterpoint October 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