COUNTERPOINT

“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.

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.

We build a fully sustainable portfolio following a disciplined asset allocation and portfolio construction process.

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.

“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.

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.