Invesco Canada blog

Insights, commentary and investing expertise

Could central banks boost stocks in the second half?


June 24, 2019
Subject | Invesco | Macro views

The Federal Reserve (Fed) met last week and clearly telegraphed that it will no longer be “patient” and that it is leaning toward loosening monetary policy. Why? Fed Chair Jay Powell said trade developments and global growth concerns are on the mind of the central bank. As I look into the second half of the year, those two items are key to my outlook as well – and I believe the willingness of central banks to become more accommodative could be a positive development for stocks.

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Will the Fed lose its patience this week?


June 17, 2019
Subject | Invesco | Macro views

All eyes will be on this week’s U.S. Federal Reserve (Fed) meeting — especially the statement (whether the central bank will retain its “patient” stance) and the “dot plot” (which charts the outlook for interest rates). The June 18-19 Fed meeting is very important because market expectations have gotten so dovish recently. And with risks rising, many investors recognize that once again the Fed stands between them and a more challenging stock market environment.

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Central banks provide a silver lining to the escalating trade war


June 10, 2019
Subject | Invesco | Macro views

A collective sigh of relief was expelled on Friday evening as U.S. President Donald Trump announced he would indefinitely suspend the planned imposition of tariffs on Mexico – which was set to go into effect on June 10. Markets have entered “risk on” mode, given that the crisis was averted. However, we need to recognize that the announcement that the U.S. would apply a tariff on Mexican goods as a way to address immigration was a “game changer.” I believe strongly that just the threat of using tariffs to achieve non-trade policy objectives is very concerning and will likely contribute to a significant escalation in economic policy uncertainty – even though the current situation has been resolved.

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What does the fragmented parliamentary election mean for Europe?


May 30, 2019
Subject | Invesco | Macro views

All eyes were on Europe this past week. First, U.K. Prime Minister Theresa May announced her resignation. Then the European parliamentary elections took place. Here are the key takeaways from a momentous week for the European continent.

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Canadian yield curve points to slow growth, not recession


May 29, 2019
Subject | Invesco | Macro views

The economic implications from an inverted yield curve may be overstated, in our view. Historically, when short-term interest rates, anchored by central bank policies, yield more than longer duration maturities the bond market is signaling that monetary policy has become restrictive. Taking on more interest rate risk in your portfolio for less yield to maturity is an unattractive option for investors.

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What’s your risk outlook?

I have the good fortune of meeting with advisors across Canada and hearing directly about the issues that are top of mind for their clients and their businesses. Usually there’s a certain amount of consistency to what they tell me in terms of sentiment in the market. The big picture view of asset class trends also tends to provide a consensus on where advisors are actively making allocations and how they are positioning investor portfolios.

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Three key takeaways from four days in Europe


April 9, 2019
Subject | Invesco | Macro views

Last week I had the pleasure of traveling in Europe, meeting with colleagues and clients in several different countries. It was a whirlwind tour, but it was well worth the jet lag to get an in-person account of the various issues facing Europe today. Below, I share three key takeaways from my trip.

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The Fed delivers on the dovish side


March 22, 2019
Subject | Invesco | Macro views

The Federal Reserve (Fed) held the target range for the U.S. federal funds at 2.25%-2.50% at its meeting on Wednesday. This outcome was in line with market expectations. In addition, the Fed indicated they do not expect to hike rates again in 2019 and only expect one hike in 2020.

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Brexit uncertainty could last for another 21 months


March 20, 2019
Subject | Institutional | Invesco | Macro views

The latest installment of the Brexit drama offers good and bad news for investors in U.K. assets and beyond: The good news is the risk of a “no deal” Brexit has receded, but the bad news is it’s still a possibility and the timeline toward resolution is now more extended. This means that persistent uncertainty is likely to continue to weigh on the U.K. and wider European economies, and may elevate the volatility of U.K. asset markets, particularly the currency.

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Change is in the air as the Fed, BOC and ECB pivot on policy


March 14, 2019
Subject | Institutional | Invesco | Macro views

There is an old Chinese proverb that states, “When the winds of change blow, some people build walls and others build windmills.” In other words, some people embrace change while others fear it. I’ve come to the conclusion that the speed of the change has much to do with how a change is received. Just look at the past week, when we saw abrupt changes in the direction of the wind for central banks, followed by largely negative reactions.

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What trade-offs will the U.S. accept for a trade deal with China?


March 7, 2019
Subject | Institutional | Invesco | Macro views

Two key risks – trade and central bank normalization – have had an outsized impact on global stocks for more than a year (sometimes positive and sometimes negative). This past week saw developments in each of these key issues.

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What lies beneath the Fed’s ‘about face’ on normalization?


February 27, 2019
Subject | Institutional | Invesco | Macro views

Last week was momentous for one specific reason: The Federal Open Market Committee (FOMC) released minutes from its January meeting, which detailed the significant “about face” that the Federal Reserve (Fed) has made over the last few months. In my view, the FOMC’s insights, along with apparent progress in U.S.-China trade talks, could enable stocks to move higher in the short term – but I’m also wary of negative implications that could lie beneath the surface.

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Five ‘swords of Damocles’ hang over markets


February 11, 2019
Subject | Institutional | Invesco | Macro views

In Greek mythology, the “sword of Damocles” is a powerful morality tale. King Dionysius is a leader who grows weary of a young sycophant, Damocles, who is constantly extolling the benefits of being king. To teach Damocles a lesson about the pressure and insecurity that comes with leadership, Dionysius allows him to sit on the throne for a day – but over the throne, the king has suspended a large sword, hung by a single hair. Damocles quickly learned what it feels like to be a leader who exists in imminent danger and jeopardy.

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The Fed changes its game plan


February 4, 2019
Subject | Invesco | Macro views

The biggest American football game of the year was played last night, and for the first three quarters, it looked as if both teams forgot how to score a touchdown. But great teams find a way to win, even when their tried-and-true game plan seems to be faltering.

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Investor sentiment stays positive despite geopolitical drama


January 14, 2019
Subject | Invesco | Macro views

There has been no shortage of drama across the macroeconomic and geopolitical landscape so far in 2019. However, it appears that investors may be tuning out much of the political theatre around them. Which storylines are moving markets now, and which may become more integral to the plot in the weeks ahead?

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Is a real winner possible in the U.S.-China trade war?


January 7, 2019
Subject | Invesco | Macro views

Students of history may recall the War of the Roses, which was waged more than 500 years ago. It was an epic battle between two rival branches of the English royal family that both had claims to England’s throne – the House of Lancaster, represented by a red rose, and the House of York, represented by a white rose. While the House of Lancaster ultimately won the War of the Roses, by some measures there was no real winner. The war lasted for many years and resulted in very significant damage to both houses. In fact, by the end of the war, the male lines in both houses had been eliminated.

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No holiday in sight for global disruption


December 17, 2018
Subject | Institutional | Invesco | Macro views

At the start of 2018, I warned about two significant forms of disruption that posed risks to markets: geopolitical disruption and monetary policy disruption. The solution to the global financial crisis – experimental monetary policy – had created greater wealth inequality, which had led to geopolitical disruption, and the situation was poised to worsen in 2018. This experimental monetary policy, especially large-scale asset purchases, was beginning to be unwound – and that was an experiment in and of itself which also had the potential to cause disruption.

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Fixed income: Gauging the ripple effects of softening economic growth

Key takeaways

  • In the US, we believe peak levels of growth are behind us and expect to see slowing in the second half of 2019.
  • Outside the US, there are also signs of softening growth.
  • Inflation is likely to increase somewhat, but we do not believe that wage inflation will be significantly passed through to consumer prices in 2019.

Global macro

In the US, we believe peak levels of growth are behind us, although we expect annual growth of around 2.75% to persist through the first half of 2019 before slowing.  Fiscal stimulus is still having a positive effect on growth, but will likely wane in the second half of 2019.  In addition, the positive financial tailwinds that have been driving the economy may turn more neutral as monetary policy continues to tighten.  Therefore, while consumer spending will likely be additive to growth in the first half, as the boost from tax cuts winds down, the question is how much will the consumer want to spend thereafter? Consumption has grown at an unsustainably high level, in our view, over the last several quarters, driven by stronger consumer confidence and tax cuts. A meaningful slowdown in consumption could have negative implications for broader growth.  These effects mean that risks to economic growth are higher in late 2019 than they have been in previous points in the cycle.

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