COUNTERPOINT

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.

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.

Quintet’s sustainable investing philosophy comprises a toolkit of approaches and dedicated assets. In this primer we deep dive into the improvers approach – arguably the most innovative sustainable investing strategy.

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 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.

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?