Invesco Canada blog

Insights, commentary and investing expertise

Will Trump’s fiscal stimulus lead to inflation?


March 27, 2017
Subject | Institutional | Macro views

Financial markets have reacted strongly to the election of U.S. President Donald Trump. While equities in the U.S. and elsewhere have risen strongly (reflecting expectations of stronger growth and therefore improved corporate earnings), bond prices have fallen (reflecting higher yields, in turn a result of higher inflation expectations). As debate continues around President Trump’s fiscal stimulus program, a key question has emerged: What role might his policies play in creating inflation?

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The future of ECB QE: Is the end in sight?

In recent months, consumer prices in the euro area have begun to align with the European Central Bank’s (ECB) inflation target of just under 2%.1 We expected January headline inflation to be around 1.8%, a far cry from the deflationary conditions that convinced the ECB to begin its asset purchase program (quantitative easing, or QE) in 2015 and then extend it in 2016. As we look forward to 2017 and beyond, we ask whether QE should extend beyond March 2018 or will the inflation hawks and external voices force the ECB to end it before the region is ready?

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Currency outlook: CAD overvalued and USD mixed

The Canadian dollar has appreciated against the U.S. dollar since the U.S. presidential election in November. Some of the strength has been due to the higher price of oil on the back of promised cuts by OPEC producers in late 2016. In addition, a recent string of positive employment reports in Canada has supported the currency. Bank of Canada Governor Poloz attempted to limit further appreciation by mentioning that a rate cut was still possible at its January meeting with limited success. We believe the Canadian dollar remains overvalued.

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Interest-rate outlook: Fed hikes on the horizon?

Yields on Canadian government bonds have hovered in a range this year as the global yield sell-off has paused. The yield curve remains in a steepening trend as the Bank of Canada has attempted to keep the possibility of a rate cut on the table, although a recent string of positive employment surprises has made that possibility less likely. Canadian government bond yields are likely to remain range-bound in the near term until more certainty emerges around global economic prospects.

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Promises to policy: What’s in store for U.S. stocks?


February 23, 2017
Subject | Active management | Institutional | Invesco

As of today, we have more questions than answers about what to expect from the new Donald Trump administration. Certainly, it appears the U.S. president has a pro-business and anti-regulation outlook, but how exactly will this translate into policy, and how will corporations and trading partners react? That remains to be seen.

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What does Trump’s rhetoric mean for Asian markets?


February 17, 2017
Subject | Active management | Institutional | Invesco | Macro views

Absent the major reform investors have been hoping for, Japan’s economy remains largely stagnant, with the yen weakening against the U.S. dollar over the last quarter of 2016. By contrast, China, along with the rest of Asia, seems poised for another year of relatively stable growth. The policies of U.S. President Donald Trump, however, could potentially spur volatility in both economies. Let’s take a closer look.

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