

COUNTERPOINT SEPTEMBER 2020
A new dawn
Businesses, governments and central banks are adapting to an evolving situation, with implications for investors everywhere
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Bill Street
Group Chief Investment Officer
Many aspects of our lives are likely to be shaped for the rest of this year and beyond by ongoing social distancing measures. Yet as offices and schools begin to reopen after a long break, we’re optimistic about transitioning back to a way of life that is more familiar. There are already some encouraging signs from real-time data that economic activity is beginning to pick up, and governments and central banks continue to offer their support.
The most successful companies are likely to be those with the vision to adapt to the new environment. Businesses that provide their services over the internet have thrived during the lockdown but there are some things we’ll never be able to do online – such as getting a haircut. Quintet’s latest conversation about what it means to lead a richer life sees a banker and a barber talk about passion and tradition, which you can watch here.
Welcome
Back to LIFE
Our lives are returning to a different version of how they used to be
Top chart
Innovative insights
New sources of big data allow us to monitor economies in real time
As a result of Covid-19, restaurant-reservation website OpenTable has started to publish data which allows us to monitor consumer behaviour. The number of seated diners in Germany and the UK has recovered to pre-crisis levels, whereas the US continues to lag. Active consumers are a
sign of economic health, but large gatherings create the risk of further virus outbreaks which could lead to tougher restrictions. We are monitoring this and other sources of real-time data closely to assess the possible impact on markets.

Investment focus
GET rEAL
Central banks have a new remit to help governments borrow cheaply


"Monetary policy is going through a conceptual revolution"
The asset allocation vector
Click an asset class to show the sub-asset classes
Quintet portfolio
ON THE RIGHT TRACK
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 bonds 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 ratification


MEDICAL Search for vaccine
POLITICAL US Presidential election (Nov)

TRADE UK–EU trade negotiations (Oct/Dec)
TRADE US–China trade tensions
Counterpoint September 2020
WE TAKE TIME TO LISTEN
We hope you enjoyed this 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 28 August, 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.
Since the oil price shocks of the 1970s, major central banks around the world have focused their energy on a single objective – keeping the rate of inflation around 2% so that their economies were running at just the right temperature. When conditions got too hot they would raise interest rates to slow things down, and when they got too cold they would reduce them to boost growth.
Central bankers are now changing their approach in response to the coronavirus pandemic. As our economies recover from the sudden and sharp recessions caused by the lockdowns, policymakers are worried about deflation, which could hinder growth. In response, the US Federal Reserve has just announced that it will be shifting to an average inflation target. The European Central Bank (ECB) will probably follow with a similar policy.
Source: OpenTable ‘The state of the restaurant industry’ database
Notes: year-over-year seated diners at a sample of restaurants on the OpenTable network across all channels: online reservations, phone reservations and walk-ins (seven-day moving average).
Seated Diners (7-Day Moving Average)

Welcome

Top chart

Investment focus

Portfolio

Monitor
Welcome
Top chart
Investment focus
Portfolio
Monitor
COUNTERPOINT SEPTEMBER 2020
A new dawn

Businesses, governments and central banks are adapting to an evolving situation, with implications for investors everywhere
Many aspects of our lives are likely to be shaped for the rest of this year and beyond by ongoing social distancing measures. Yet as offices and schools begin to reopen after a long break, we’re optimistic about transitioning back to a way of life that is more familiar. There are already some encouraging signs from real-time data that economic activity is beginning to pick up, and governments and central banks continue to offer their support.
The most successful companies are likely to be those with the vision to adapt to the new environment. Businesses that provide their services over the internet have thrived during the lockdown but there are some things we’ll never be able to do online – such as getting a haircut. Quintet’s latest conversation about what it means to lead a richer life sees a banker and a barber talk about passion and tradition, which you can watch here.
As a result of Covid-19, restaurant-reservation website OpenTable has started to publish data which allows us to monitor consumer behaviour. The number of seated diners in Germany and the UK has recovered to pre-crisis levels, whereas the US continues to lag. Active consumers are a sign of economic health, but large gatherings create the risk of further virus outbreaks which could lead to tougher restrictions. We are monitoring this and other sources of real-time data closely to assess the possible impact on markets.

Since the oil price shocks of the 1970s, major central banks around the world have focused their energy on a single objective – keeping the rate of inflation around 2% so that their economies were running at just the right temperature. When conditions got too hot they would raise interest rates to slow things down, and when they got too cold they would reduce them to boost growth.
Central bankers are now changing their approach in response to the coronavirus pandemic. As our economies recover from the sudden and sharp recessions caused by the lockdowns, policymakers are worried about deflation, which could hinder growth. In response, the US Federal Reserve has just announced that it will be shifting to an average inflation target. The European Central Bank (ECB) will probably follow with a similar policy.

"Monetary policy is going through a conceptual revolution"
Although this change might not push up the rate of inflation immediately, it should at least raise inflation expectations. In theory, central banks will still have the flexibility to raise interest rates if prices start to increase too quickly. However, in practice they are unlikely to do so because governments need to be able to borrow money at affordable rates in order to pay for their massive economic stimulus measures.
How can investors navigate an environment of persistently low interest rates? After accounting for the rate of inflation, the real yield on offer from many government bonds is actually negative. That’s one of the reasons why the price of gold has risen so sharply this year, as investors have looked for other safe-haven assets. We also believe that as the recovery gathers pace the macroeconomic environment will continue to be supportive of equities and high-yield corporate bonds.
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 bonds 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 ratification


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 28 August, 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
Back to LIFE

Our lives are returning to a different version of how they used to be

Bill Street
Group Chief Investment Officer

Top chart
Innovative insights
New sources of big data allow us to monitor economies in real time
Source: OpenTable ‘The state of the restaurant industry’ database
Notes: year-over-year seated diners at a sample of restaurants on the OpenTable network across all channels: online reservations, phone reservations and walk-ins (seven-day moving average).
Seated Diners (7-Day Moving Average)

Investment focus
GET rEAL
Central banks have a new remit to help governments borrow cheaply

Quintet portfolio
ON THE RIGHT TRACK
We remain confident about the outlook for investment returns over the long term

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 September 2020
WE TAKE TIME TO LISTEN
We hope you enjoyed this 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.