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Counterpoint Outlook 2025: New horizons

As we turn the page on 2024, one thing is clear: the world we invest in continues to evolve. The past year defied expectations, surprising us with economic resilience even as markets braced for turbulence. So, what did we learn, and how can we better prepare for what 2025 might bring?

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Counterpoint Outlook 2025: New horizons

As we turn the page on 2024, one thing is clear: the world we invest in continues to evolve. The past year defied expectations, surprising us with economic resilience even as markets braced for turbulence. So, what did we learn, and how can we better prepare for what 2025 might bring?

Our latest markets and investing insights

New horizons

03 December 2024

New horizons

Market Insights

As we turn the page on 2024, one thing is clear: the world we invest in continues to evolve. The past year defied expectations, surprising us with economic resilience even as markets braced for turbulence. So, what did we learn, and how can we better prepare for what 2025 might bring?

Preparing for the unpredictable

14 November 2024

Preparing for the unpredictable

November is the time of the year when, together with the Investment Committee, I start preparing for our year-ahead market outlook. But, to tell you the truth, we do this continuously: as new research comes in and events unfold, we keep refining our market outlook, day in and day out.

US elections: a pivotal moment

06 November 2024

US elections: a pivotal moment

Market Insights

While the US presidential election outcome isn’t confirmed yet, Donald Trump is in the lead at the time of writing. With three swing states – Pennsylvania, North Carolina and Georgia – already called for Trump by the US media, he’s also slightly in the lead in the remaining four key states of Michigan, Wisconsin, Nevada and Arizona.

2024: The Mother of All Election Years

25 October 2024

2024: The Mother of All Election Years

Market Insights

In 2024, a monumental event is unfolding as 4 billion people across 74 countries cast their votes at national, regional, and local levels. Among these, the US Presidential, Senate, and Congress elections on November 5 are poised to be the most market-moving.

Giving credit where it’s due

15 October 2024

Giving credit where it’s due

Market Insights

The past few weeks have been quite volatile. First, tensions in the Middle East continued to grab the headlines, pushing oil prices higher. Second, US job growth, services activity and inflation came in higher than expected, leading to markets expecting smaller, more gradual US Federal Reserve (Fed) rate cuts.

Navigating market volatility

09 September 2024

Navigating market volatility

Market Insights

The adage “sell in May and go away”, referring to the historically weaker performance of stocks from May to October compared with the other half of the year, didn’t disappoint this time around, too.

Why should investors consider adding private markets to their portfolios?

Why should investors consider adding private markets to their portfolios?

Invest differently

Private markets were once the reserve of sophisticated and institutional investors but have experienced significant growth in recent years. Now, a far broader range of private market investments are available to clients.

Europe revisited

Europe revisited

Market Insights

A bit like the unpredictable weather we’ve had over the past few weeks, politics has been a rollercoaster. As expected, the UK election delivered a Labour win. While there might be tax and broader fiscal implications at the individual level, the outcome wasn’t unexpected, which is why it hasn’t moved markets that much.

French elections – a hung parliament, with a twist

French elections – a hung parliament, with a twist

Market Insights

The overall outcome of the French legislative elections came as expected: a hung parliament where no party/alliance managed to secure the absolute majority of 289 seats. But it came with a twist.

UK election: Market insights

UK election: Market insights

Market Insights

That Labour won a strong absolute majority, and the Conservative Party sank to the lowest result ever isn’t a surprise for markets, given the polls. The next government plans to follow the same fiscal rules as the outgoing one and so, in our view, it will have limited fiscal space. However, there could be modest effects on different groups of consumers and firms.

A deep-dive on the French elections

A deep-dive on the French elections

Market Insights

The French head to the polls on June 30 and July 7 to elect their members of Parliament. How does that work? There are 577 seats up for grabs, so a party needs 289 seats to have an outright majority to govern. Anything less, in general, would mean that several parties may try to work together to form a coalition. This has been the case since 2022, with a coalition supporting President Macron given that his party does not have an outright majority.

Staying the course

Staying the course

Market Insights

All eyes are on Europe this summer. It’s one of the most visited regions, time and again, by tourists from all around the globe. The European Football Championship also kicked off last week in Germany, the Summer Olympics in Paris starts next month and, for those more politically minded, we just had the European elections and there are key national elections in France and the UK on the horizon (and, Europe aside, the all-important US election in November).

Why we think our 2024 currency forecasts are on track

Why we think our 2024 currency forecasts are on track

Market Insights

Looking at how a currency behaves could reveal what direction an economy is trending in. In other words, a currency that appreciates often reflects an economy that’s doing well, and vice versa.

European green shoots

European green shoots

Market Insights

Spring is finally here, and it looks like the weather is gradually improving. We got so used to the gloom of Mach and April that it’s perhaps natural to extrapolate the same conditions for May. But the sunshine came unexpectedly. Put differently, in investment jargon, relative to our downbeat expectations, we got a surprise to the upside.

Stay active! (But don’t overdo it)

Stay active! (But don’t overdo it)

The arrival of spring means one can spend extra time exercising outdoors (at least when the weather cooperates). While one doesn’t need to run a marathon to get back in shape, we think active portfolio management is more like a long jog than a short sprint – the key is keeping the right pace.

The case for small-cap equities

The case for small-cap equities

Market Insights

First thing first, when we talk about small-cap equities (or small caps), it’s important to understand what “cap” refers to. Cap is short for capitalisation, which in turn is short for market capitalisation.

In the balance

In the balance

Market Insights

The first few months of 2024 have come as somewhat of a surprise to investors. For example, US growth has stayed resilient, continuing to defy the odds of recession, so markets have had to reevaluate their expectations for the year. And we are no different. Investing is about finding the right balance between having conviction in your long-term strategy and being conscious of the opportunities in the short term.

Reshoring – The world is not flat anymore

21 February 2024

Reshoring – The world is not flat anymore

Thematic investing

After three decades of globalisation, could reshoring change the global order?

The tide is turning

12 February 2024

The tide is turning

Market Insights

In our 2024 Investment Outlook, released in December 2023, I mentioned the importance of building an investment strategy with multiple time horizons in mind. And, over the past two months, things have changed for the medium-term growth outlook. In January, the 2023 US growth figures came in better than expected, showing a resilience in the US economy that the market didn’t anticipate.

(Invest) some of your time

24 January 2024

(Invest) some of your time

Speaking about foresight and perceptiveness in markets, John Maynard Keynes, likely one the most well-known economists ever, said that successful investing is anticipating the anticipations of others. Keynes was also an investor.

How to include liquid alternatives in a traditional portfolio

20 December 2023

How to include liquid alternatives in a traditional portfolio

Invest differently

A traditional portfolio of stocks and bonds has been a popular investment strategy for decades. However, with market conditions changing and volatility increasing, investors are looking for alternative options to add value and, importantly, diversification to their portfolios. This is where liquid alternatives can play a role.

Investors’ worst enemy (themselves?)

15 November 2023

Investors’ worst enemy (themselves?)

Striking a balance between wealth protection and growth is both science and art. Finance is a technical field, but it’s also driven by emotions.

Three reasons why in 2023 big thematic trends have influenced markets

13 October 2023

Three reasons why in 2023 big thematic trends have influenced markets

Thematic investing

2023 has been a year where big thematic trends have influenced markets for three reasons. Firstly, the rise of AI (Artificial Intelligence) boosted themes like Semiconductors and Cloud Computing, driving the big US tech stocks and major indices.

Quality bonds turn more attractive

24 September 2023

Quality bonds turn more attractive

Market Insights

We expect the major central banks to pause their cycle of interest rate increases as global economic growth slows over the coming months. This makes high-quality bonds even more attractive.

It’s what you know (and just ain’t so)

06 September 2023

It’s what you know (and just ain’t so)

There’s nothing better than catching up with market thinking and returning to old classics when on holiday; that’s what we all love to do, after all. Mark Twain couldn’t say it better: making our vocation our vacation is the secret to success.

Peak rates: a moving target

Peak rates: a moving target

Market Insights

Peak inflation is now well behind us, especially in the US, but interest rates continue to rise. Central bank messaging of late has been quite clear: the battle against inflation is not won. But, even though the peak in interest rates is a moving target, we believe it’s now in sight, just slightly delayed from our initial expectations.

Quintet 3-year-thematic: Why zooming out is also important

Quintet 3-year-thematic: Why zooming out is also important

Thematic investing

Our thematic investing approach involves gaining exposure to companies and themes that benefit from major global trends over the long term.

Interest rate peak in sight

Interest rate peak in sight

Market Insights

The US is slowing, China/Asia is rebounding, and Europe is caught up between the two. We expect global growth and inflation to slow gradually, bringing the end of developed market central banks’ rate rises in sight.

Go west for bonds & east for stocks

Go west for bonds & east for stocks

Market Insights

The first quarter of 2023 saw a reassessment of global economic conditions by investors and policymakers. Asynchronous cycles are now beginning to emerge as China continues to re-open while the West battles with inflation and market volatility.

Timing the market vs time in the market

24 February 2023

Timing the market vs time in the market

Market Insights

“When it comes to so-called market timing there are only two sorts of people: those who can’t do it, and those who know they can’t do it”, British investor Terry Smith famously said. Rather than timing the market, a better strategy is time in the market.

Bonds are back

06 February 2023

Bonds are back

Market Insights

Following one of the worst years in recent memory for fixed income markets, high-quality government bonds are rebounding and now offer decent returns for relatively low levels of risk.

The USD hedge with an edge

24 October 2022

The USD hedge with an edge

Market Insights

Any self-respecting investment strategist derives a fair amount of titles for research reports from Western films. If it’s scenario analysis, then The Good, the Bad and the Ugly does a good job. If it’s fiscal and political uncertainty we’re talking about, as we’ve seen in the UK recently (leading to Liz Truss’s resignation and the shortest government in the country’s history), perhaps The Wild Bunch. And, of course, A Fistful of Dollars refers to currencies.

Market thinking, fast and slow

26 September 2022

Market thinking, fast and slow

Market Insights

Markets are full of sayings that somehow have to do with water: “one tide lifts all boats” when liquidity comes in; or, vice versa, “when the tide goes out, you find out who’s swimming naked”. Or they have to do with animals: are you a “bull” or a “bear”? Investors ask hurriedly.

Success and excess

Success and excess

Market Insights

The success of monetary and fiscal stimulus in cushioning the pandemic blow is well known. But the resulting demand surge, pressing against constrained supply, has also produced an excess of inflation and rising interest rates – a drag on equities.

The R word

The R word

Market Insights

“Why do economists use decimal points in their forecasts? To show that they have a sense of humour” is a joke that resurfaces in the marketplace every time volatility picks up. There’s some truth in this. Things rarely move consistently in one direction. So incrementally tracking how they’re unfolding is useful.

Micro meets macro

Micro meets macro

Thematic investing

Our Counterpoint mid-year outlook, published a few days ago, goes from micro to macro and thematic. It talks about how geopolitical and supply shocks in the age of disruption are impacting companies, sectors, inflation and economic policy, our energy supply and technologies, creating risks and opportunities along the way.

Investing thematically in a market transition

Investing thematically in a market transition

Thematic investing

As global financial markets work through a period of elevated volatility and increased risks, we prefer investment themes with robust structural growth characteristics but also stronger fundamentals, such as those with resilient earnings and some defensive qualities.

Peaks and valleys

Peaks and valleys

Market Insights

“Economists will know tomorrow why the things they predicted yesterday didn’t happen” is a joke that, in this fast-moving market cycle, has a deeper lesson. Rather than sticking to an all-knowing prediction, it’s more fruitful to use a transparent cause-effect framework to recalibrate the base case as events unfold.

Positive earnings surprises but softer guidance

Positive earnings surprises but softer guidance

Market Insights

Sales and earnings growth for Q1 2022 in both the US and Europe exceeded expectations, led by strong energy sector results. The percentage of companies beating forecasts is above the long-term trend, but the margin of surprise is lower than recent quarters.

Reading the signs (and the curves)

Reading the signs (and the curves)

Market Insights

In the mid-1990s, British Prime Minister John Major reportedly asked Russian President Boris Yeltsin to describe the Russian economy in one word. He replied “good”. Surprised by this assessment, Major asked Yeltsin if he could describe it in two words.

Looking east: investing in Asia high yield

Looking east: investing in Asia high yield

Market Insights

Following a poor start to 2022, Asia high yield (HY) bonds have staged a notable recovery since mid-March. We have been holding a tactical overweight position against USD investment grade (IG) bonds. What are the main features of the Asia HY market and our outlook for the asset class?

The yield curve and recession: truth and myth

The yield curve and recession: truth and myth

Market Insights

Some segments of the Treasury curve are now inverted. While investors see this as a warning signal, the reality is more nuanced. We explore what it means for the probability of US recession, and for equity and other asset class returns.

Ukraine War: themes to de-risk economies

Ukraine War: themes to de-risk economies

Market Insights

We believe the war in Ukraine – which is first and foremost a humanitarian tragedy – will spur some countries and businesses to reduce long-term risks that have emerged from that conflict.

French elections: geopolitics all around

French elections: geopolitics all around

Market Insights

On 10 and 24 April, France will elect its new president at a crucial time – a war raging on the fringes of Europe. Emmanuel Macron looks set to be re-elected for a second term. We explore the key implications for the economy and markets.

The economic consequences of war

The economic consequences of war

Market Insights

In The Economic Consequences of the Peace, published in 1919, John Maynard Keynes predicted that stiff war reparations would lead Germany to financial instability, with economic and political repercussions across Europe and the whole world.

Off the lows

Off the lows

Market Insights

While geopolitical uncertainty could keep them low for longer, bond yields are on the rise as central banks normalise policy. We expect them to move higher but, over the medium term, see lower rates than in past cycles.

Russian dolls

28 February 2022

Russian dolls

Market Insights

It’s tempting to attribute the ongoing risk-off move to Russia’s invasion of Ukraine. That’s part of the story but, like Russian dolls, there’s a scenario inside a bigger one, which is inside an even bigger scenario, and so on.

How we’re thinking about Russia/Ukraine and our investment strategy

24 February 2022

How we’re thinking about Russia/Ukraine and our investment strategy

Market Insights

Solid Q4 results with signs of divergence

14 February 2022

Solid Q4 results with signs of divergence

Market Insights

As the post-pandemic recovery matures, corporate earnings are surprising by less but still exceeding forecasts. We are seeing a divergence in performance within sectors, but must be careful not to extrapolate short-term trends.

Innovation nation

07 February 2022

Innovation nation

Thematic investing

We see innovation continuing apace and even accelerating, despite high costs currently. We believe top innovators are likely to be long-term winners. We see the current weakness in ‘innovation equities’ as a buying opportunity.

Rearview mirror

31 January 2022

Rearview mirror

Market Insights

At the beginning of the new year, we look back at the performance of our Quintet Group Strategic Asset Allocations (SAA). In this second edition of our biannual review we explore how our SAAs fared amid buoyant risk markets and macro volatility.

The name is bond

24 January 2022

The name is bond

Market Insights

Once again, the rise in core bond yields is driving markets across geographies, asset classes, sectors and styles, with a sharp equity rotation away from growth and into value stocks. In the James Bond movie series, 007 eventually overcomes an improbable sequence of obstacles and makes it through.

Moving past the peak

17 January 2022

Moving past the peak

Market Insights

While economic growth and stimulus should become less positive this year, inflation and the virus impact should become less negative too. We’re tactically overweight US equities and a range of credit exposures.

Big macro vs little macro

03 January 2022

Big macro vs little macro

Market Insights

Economist and best-selling author JK Galbraith once quipped that there are two kinds of forecasters: those who don’t know and those who don’t know they don’t know. Turns out, it may be worse.

Thematic investing: fast forward to the future

29 November 2021

Thematic investing: fast forward to the future

Thematic investing

The world is changing rapidly, driven by technological and environmental factors, and these shifts could have profound long-term implications for investors. Our thematic framework can help navigate the evolving investment landscape.

Cheques and imbalances

22 November 2021

Cheques and imbalances

Market Insights

Paraphrasing an old adage, a forecaster is a portfolio manager who never marks to market. There’s some truth in this. There’s a disincentive in rapidly shifting views back and forth – which is equal to not having a view.

Solid Q3 results despite the challenges

15 November 2021

Solid Q3 results despite the challenges

Market Insights

In the third quarter of 2021, inflation rose in most countries and the global economy faced ongoing supply chain issues. Despite concerns about how these challenges would impact earnings, the results are better than expected and forecasts have been revised higher across most sectors.

What a difference a year makes

08 November 2021

What a difference a year makes

Market Insights

In this latest note focusing on our strategic asset allocation (SAA), we explore our updated risk and return expectations for the next 10 years. What has driven the change in our capital market assumptions (CMAs) and how do they affect investment portfolios?

Are equities too expensive?

01 November 2021

Are equities too expensive?

Market Insights

We’re often asked this question when discussing our current tactical overweight in equities over bonds, and understandably so. Many measures of equity valuations are high compared with history. But that doesn’t mean global stock markets can’t continue to rise.

Going to the movies

25 October 2021

Going to the movies

Market Insights

Markets are grappling with two new(ish) facts. First, energy prices are surging. Second, central banks are diverging. Have investors seen this movie before?

The state of European credit markets

11 October 2021

The state of European credit markets

Market Insights

Bond yields are rising following a more hawkish tone from central banks around the world. Monetary policy is becoming less accommodative but we don’t believe it’s the end of the game for credit in Europe.

Build back better: infrastructure goes global

04 October 2021

Build back better: infrastructure goes global

Market Insights

Spending on infrastructure looks set to rise, mostly in the US but also in Europe. This is a structural trend to rebuild the economy in a sustainable way, with a focus on green and digital investment.

Asian high yield: well-compensated risks

27 September 2021

Asian high yield: well-compensated risks

Market Insights

Asian high yield (HY) bonds have experienced a period of elevated volatility and rising spreads since June. The correction has accelerated in recent weeks, with the rapid deterioration of property developer Evergrande’s liquidity situation a major catalyst. We revisit the investment case for Asian HY bonds and confirm our conviction in the asset class over our tactical horizon of 6–12 months, despite near-term risks.

Back to school

20 September 2021

Back to school

Market Insights

September is all about getting back to normal life now that the holidays are over. This sense of normalisation – if one could really call it that in the Covid world – is happening in the wider economy too.

Germany’s election: life after Merkel

13 September 2021

Germany’s election: life after Merkel

Market Insights

On 26 September, Germany will elect a new Bundestag. The outcome will set the stage for the next coalition, headed by a new chancellor, with Angela Merkel set to step down after 16 years. The next government is likely to have a greener tilt.

Fed tapering explained

06 September 2021

Fed tapering explained

Market Insights

The upcoming reduction in net asset purchases is likely to put upward pressure on Treasury yields, but only moderately as rate hikes aren’t yet in sight. Credit and equity markets should be able to cope.

Our strategic asset allocation process in focus

Our strategic asset allocation process in focus

Market Insights

In this latest note exploring our approach to strategic asset allocation (SAA), we answer some common questions. How do we arrive at our return expectations? How to deal with lower future returns when building globally diversified portfolios? What is the role of geopolitics and sustainability in our investment process?

Another strong set of earnings results

Another strong set of earnings results

Market Insights

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

Delta Blues

Delta Blues

Market Insights

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.

Market crosscurrents

Market crosscurrents

Market Insights

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.

The twists and turns of the cycle

The twists and turns of the cycle

Market Insights

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.

Twin Peaks

Twin Peaks

Market Insights

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.

The power of words

The power of words

Market Insights

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.

With the benefit of hindsight

With the benefit of hindsight

Market Insights

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?

Steeper for longer

Steeper for longer

Market Insights

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 inflation head fake

The inflation head fake

Market Insights

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.

Running on high pressure

Running on high pressure

Market Insights

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.

Stay tuned!

Stay tuned!

Market Insights

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.

Joining the party

Joining the party

Market Insights

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.

Ringing the inflation bell

Ringing the inflation bell

Market Insights

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 big long

The big long

Market Insights

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.

Bidenomics

Bidenomics

Market Insights

Economists’ failure to accurately predict the magnitude of big events like booms and recessions and – perhaps more often than they’d like to admit – the timing of these events with sufficient foresight, inevitably makes them the target of all sorts of jokes: for example, how can you tell that economists have a sense of humour? Because they put decimal points in their forecasts.

Record surprises… again!

Record surprises… again!

Market Insights

The first-quarter earnings season highlights once again that consensus expectations for corporate profits have been too conservative as the world recovers from the pandemic. Near-term expectations are being revised higher.

Taxes, tapering, timing and thresholds

Taxes, tapering, timing and thresholds

Market Insights

"Nothing is certain but death and taxes" is a rather fatalistic proverb drawing on the inevitability of the life cycle to make a parallel with the inevitability of the fiscal burden. However, just like with Fed tapering, the key thing with any tax policy change is timing and thresholds.

Turning a corner

Turning a corner

Market Insights

One of the perennial dilemmas of strategists is figuring out when good news becomes bad news in the eyes of the market, and vice versa. Say the jobs report comes in stronger than expected. This would be good news and the market would go up. More people working means more tax revenues, less spending on unemployment benefits and an increase in demand.

Flying on two engines

Flying on two engines

Market Insights

The long-awaited inflation spike has come. Price cuts in the early months of the pandemic are now dropping out of the annual comparison. Surging commodity prices and temporary supply bottlenecks are doing the rest. But we don’t see the pace of wage growth and degree of tightness in the labour market that could result in a more long-lasting inflation spiral.

Commodity matters

Commodity matters

Market Insights

How should investors think about the price of gold following the pickup in real yields? What’s the outlook for oil versus metals such as copper now that economies are reopening?

May two (usually) wrongs make a right?

May two (usually) wrongs make a right?

Market Insights

Microeconomists are wrong about specific things – economist and comedian Yoram Bauman often says – whereas macroeconomists are wrong in general. Could it be different this time around? A critical look at both the micro and macro drivers of bond yields suggests that a large part of the move higher, at least in the short term, is likely to be behind us.

Capital at risk

Capital at risk

Market Insights

In the fourth piece in a series exploring our approach to strategic asset allocation (SAA), we look at what our capital market assumptions tell us about recovering losses when things don’t go as planned and why history is a useful but imperfect guide to the future.

A crash of rhinos

A crash of rhinos

Market Insights

The capital sins of forecasting are flip-flopping (rapidly switching from one view to another, back and forth) and salami-slicing (frequently making incremental, insignificant changes). Dealing with uncertainty is a key part of forecasting. There are two types of risks. Black swans, such as Covid-19, are unknown unknowns, high-impact but very rare events that investors often underappreciate.

The Greenback's bounceback

The Greenback's bounceback

Market Insights

The caricature of the strategist always painting a year of two halves, one bullish and the other bearish or vice versa, is partly true. What’s behind it is the impulse to stay current with macro developments. Timing turning points isn’t easy, but keeping an eye on how things are changing is healthy. We got strong US growth upgrades and higher interest rates lately. This is why the US dollar has strengthened and may continue to do so for some time.

The inflation question

The inflation question

Market Insights

Should investors worry about inflation? Is the upcoming spike temporary, a longlasting trend leading to central banks hiking rates or are bond yields ultimately overreacting?

The devil is in the timing

The devil is in the timing

Market Insights

Former US President Harry Truman once pleaded “give me a one-handed economist”, having tired of his advisers proclaiming “on the one hand, this” but “on the other hand, that”. The investor debate on whether rising bond yields and, potentially, higher inflation (however transitory) are signs of recovery and reflation or, rather, a market setback as central banks may tighten policy, feels a bit like this.

Optimal portfolios in a low yield world

Optimal portfolios in a low yield world

Market Insights

The third piece in a series exploring our approach to strategic asset allocation takes a closer look at our expected evolution for eurozone government bond yields and the role they play in optimising the risk and return balance in well- diversified portfolios.

Liquid markets

Liquid markets

Market Insights

Martial artist and movie star Bruce Lee famously summarised his philosophy as “be water”. He meant that adaptability is a key skill (“be formless, shapeless, like water”) and that the same thing can have different effects depending on how sudden, fast the movement is (“water can flow or it can crash”). The rise in bond yields is just like this.

Emerging issues

Emerging issues

Market Insights

Our scorecards for emerging markets highlight where fundamentals are resilient and where they’re not. These measures are especially important if bond yields overshoot their forecasts.

It takes two to tango

It takes two to tango

Market Insights

Back in the 1990s, investors worried about a potential spike in bond yields if Bill Clinton pushed through with his plan of economic stimulus. James Carville, his adviser, joked that, rather than as the next US president or a baseball player, he wanted to be reincarnated as the bond market, because “you can intimidate everybody”.

It's all SPAC-tacular

22 February 2021

It's all SPAC-tacular

Market Insights

The most popular questions these days aren’t so much about what’s going on in the macro space. They’re about things ranging from the rise of SPACs, or special purpose acquisition companies, to cryptocurrencies and the role of retail trading. Pockets of investors seem to worry that ‘excessive exuberance’ could create instability in the marketplace.

It's not rocket science

15 February 2021

It's not rocket science

Market Insights

The case for cyclical improvement, by now, is widely shared in the marketplace. But, in one respect, our outlook is more optimistic: we see a compelling case for structural improvement over the longer horizon too. For much of the past couple of decades the impact of innovation has underwhelmed many forecasters.

Earnings season: beating expectations again

15 February 2021

Earnings season: beating expectations again

Market Insights

The fourth-quarter earnings season highlighted once again that consensus expectations for corporate profits have been too conservative as the world adapts to and slowly emerges from the pandemic.