The second-quarter earnings season has been better than expected. As the global economy recovers from the pandemic, consensus profit forecasts have been too conservative again, and are being revised higher for the rest of this year and into 2022

The past 18 months have been an exercise in humility for most forecasters. Even now, the typical thinking about the spread of the Delta variant is to highlight (so far) limited effects while quickly flagging that things could turn out worse than expected. The problem with this approach is that it’s unidimensional: it delivers variants of the same scenario, with slightly different assumptions.

Another month, another upside surprise in inflation. Yet the drivers appear the same: a handful of categories – such as used cars – are driving the spike, given strong demand pressing against constrained supply.

We introduce an indicator that captures economic and financial market dynamics in the US across different phases of the business cycle. This information is useful for making investment decisions.

Quintet’s sustainable investing philosophy comprises a toolkit of approaches and dedicated assets. In this primer we deep dive into dedicated assets – arguably the sustainable investing strategy which can deliver the greatest real-world impact.

Watching the Euro 2020 final this weekend reminded us of the expression “there’s no such a thing as a free lunch”. In markets, a few weeks ago the key worry was too high bond yields as rising inflation would lead to central bank tightening. Over time, this would weaken economic and earnings growth, negatively impacting equity prices.

Our Counterpoint 2021 mid-year update suggests that volatility could rise from here: there’s less policy ammunition left if things unexpectedly go wrong, such as new virus variants derailing the recovery; alternatively, stimulus withdrawal could prove difficult, potentially raising financial instability.

The fifth piece in a series exploring our approach to strategic asset allocation (SAA) looks back. In this inaugural edition of our biannual SAA performance review, we recap the first half of the year through the lens of our Quintet Group SAAs. How did they perform and what drove returns?

As markets debate Fed policy, the key question is whether the central bank will still boost the cycle or lean against it. It all comes down to how policymakers react to inflationary pressures. We’re more in the camp of continued support.

As the cycle matures, rate hikes approach and the yield curve typically flattens. We’ve seen this market dynamic playing out quite clearly following the latest Fed meeting. The central bank’s ‘dot plot’ – a graphical representation of the committee members’ economic and rate expectations – showed two hikes in 2023 rather than zero as previously, triggering a sharper selloff in shorter-dated Treasuries and, therefore, flattening the curve.

The key strategy for economists to get attention and avoid sounding ‘too consensus’ is to assign high probabilities to events without taking them as base case. Saying that something has a 30-40% probability of happening sounds high enough to make it an important risk to watch but, if it doesn’t happen, chances were always less than even to begin with. A better way is to frame a debate and look at the pros and cons of both sides’ arguments.

As economies reopen, we’re likely to see two overlapping patterns – a ‘bungee jump’ driven by a focal point created by the resumption of activity as mobility picks up, and a more traditional ‘cycle’. The bungee jump is about the short-term displacement of activity as governments closed down entire economies by decree and deployed massive stimulus at the same time.

“Counterpoint” highlights bullish view on global economy and equity markets, despite near-term inflation concerns and expected higher volatility

The business of forecasting is a tricky one. This is because prediction and explanation are different things. Of course, this isn’t unique to the economy and financial markets: alchemists could predict that combining two elements would result in a third one, but couldn’t explain exactly why; geologists have great explanations for earthquakes, but can’t predict when the next one will happen.

Our equity investment process is built on a robust principles-based sustainable philosophy, combining our expertise with high-quality data. Sustainable investors are acknowledging that material ESG factors influence investment returns, as we explain here.

An old saying about this or that economy trying to fix its structural problems is that it’s the opportunity of the future… and always will be. The opportunity never really materialises in full, or doesn’t last long enough. To strategists, sometimes the euro area feels like this.

Experienced banker to drive growth of Quintet’s book of institutional and private clients seeking world-class global custody and execution services

Scores of economists cut their teeth on one of the many editions of Rudi Dornbusch’s textbook: Macroeconomics. While the title may seem perhaps a bit unimaginative – at least to some – the author’s quotes are the stuff of legend. One in particular resonates today: “in economics, things take longer to happen than you think they will, and then they happen faster than you thought they could”. Take gold.

A side-effect of prolonged lockdowns is that the entire Netflix catalogue gets nearly exhausted at some point. When that happens, classics come back in vogue – both films and economic topics. If The Postman Always Rings Twice, so does inflation: it makes the news both when it happens and then a year later, when it distorts comparisons that look back 12 months.

The pandemic has turbocharged a range of pre-existing trends that are changing the way of doing things across many economies. While quantifying the macro impact is highly uncertain, these shifting paradigms are already visible at the sector level.