Our insights

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.

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.

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.

"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.

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.

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.

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?

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.

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.

Quintet's incorporation of environmental and social characteristics comprises a toolkit of approaches and dedicated assets. In this primer we deep dive into the improvers approach – arguably the most innovative ESG investing strategy.