Invesco Canada blog

Insights, commentary and investing expertise

Real estate: The outlook for real estate fundamentals is positive, but risks remain

Key takeaways

  • Risks today are crystallizing; many are more global in nature.
  • Pricing remains attractive; however, yield/cap rate compression is largely behind us.
  • Total returns in 2019 are likely to be driven by net operating income growth.

Strong growth in developed economies should continue to support favorable real estate fundamentals in the near term. The baseline scenario remains very positive, and global listed equities’ earnings yields are providing a positive spread over local government bonds, a sign that real estate is still fairly priced. Yet macro risks to the outlook are perhaps now greater today than in prior years; many are increasingly global in nature. They include rising populism, an escalation of the US-China trade war, a monetary policy normalization misstep, a disorderly Brexit or a China debt crisis.  Should any one of them materialize, it would have the potential to derail the global growth outlook to a measurable degree.

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city planning, real estate

Chinese equities: What is in store for Chinese equities in 2019?

Key takeaways

  • We believe Chinese equities represent some of the best structural opportunities across global markets.
  • Following the correction in 2018, we believe the risk-reward picture has turned exceptionally favorable.
  • We believe corporate fundamentals will remain strong given solid support from the domestic market.

There has been a disconnect between sentiment and fundamentals when it comes to Chinese equities in 2018. Market sentiment has been weak (driven by the changing relationship with the US and moderating growth), while economic fundmentals remained decent. China was on track to deliver its growth target despite moderation, widely known as a result of economic transitioning towards high quality growth.

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Technology: A look at the technologies we believe will define 2019

Key Takeaways

  • Artificial intelligence applications will continue to improve, with the ability to digest and analyze ever-increasing amounts of data to drive a better customer experience.
  • Companies will begin investing more heavily in the reduced latency, enhanced security and bandwidth savings of edge computing.
  • Blockchain and token economics diffuse into the early adopters.
  • Companies’ abilities to attract and retain diverse and skilled talent in these emergent technologies, including their physical space and location strategies.

Artificial intelligence and the data wars

The cat is out of the bag

Artificial intelligence (AI) applications are likely to have a profound impact on businesses, markets, and global economies in 2019 and beyond. At the micro level, machine learning and the vast (and growing) amounts of underlying data should continue to improve client experiences through predictive analytics and personalization.

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Humanoid robots, innovation

Global equities: A decade after the global financial crisis, a mixed bag of growth

Key takeaways

  • The overvaluation of structural growth stocks, such as technology stocks, is unsustainable, in our view.
  • For markets used to easy money, the transition to a more ‘normal’ period for central banks is likely to pose a challenge.
  • The European market looks a lot more attractively valued than the US, especially those stocks more sensitive to the direction of the economy, such as banks.

The outlook for global growth has become more mixed. While the synchronised economic expansion that I discussed in this piece last year is less widespread today, it should still be sufficient for corporate earnings to grow. Amid continued regime change – quantitative easing has given way to quantitative tightening, and interest rates are rising – the US continues to press ahead, while there is less momentum elsewhere.

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European Central Bank

Stock losses snowball across the globe in a December sell-off


December 6, 2018
Subject | Institutional | Invesco | Macro views

U.S. stocks began a dramatic sell-off on Tuesday that has continued and spread to other parts of the world, creating intense headlines across the globe on Thursday. There has been a flight to the perceived safety of sovereign debt. The yield on the 10-year U.S. Treasury fell dramatically, from more than 3% at the start of the week to 2.83% as of this writing1 – and other major sovereign debt yields also followed suit. Some areas of the yield curve inverted, and the 2-year/10-year yield curve is in danger of inverting.

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Want to build smart cities? Then we need a new infrastructure financing model


November 30, 2018
Subject | Industry views | Institutional | Invesco | Macro views

What comes to mind when you hear the term “smart city”? It might be a clean and safe space where people and places are connected by digital technology. Or a place where self-driving cars take us around and pollution is a thing of the past. We all have a vision of what a smart city should be – but for most of us what we imagine is far removed from the cities we actually inhabit, with clogged roads, smoggy days, and outdated infrastructure.

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The Rise of Robots


November 5, 2018
Subject | Industry views | Institutional | Invesco | Macro views

How the fourth industrial revolution will transform economics, politics, and more

After two centuries of industrial transformation and change, we’ve reached what many now call the Fourth Industrial Revolution. It’s marked not by the introduction of steam power or the advent of mass production but by the rise of artificial intelligence and automation that will fundamentally transform the global division of labour.

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October lives up to its frightening reputation for investors


October 30, 2018
Subject | Institutional | Invesco

Once again, the month of October has been living up to its frightful reputation for wreaking havoc on stock prices: 1929 and 1987 are prime examples, and we can now safely say that 2018 will also go down in history as an illustration of October’s ability to scare investors. Unfortunately, I don’t foresee this volatility easing too much over the next few weeks.

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Tariffs: Examining the economic and capital market consequences

Trade tensions have escalated in recent months to a point we haven’t seen in many years. At times in the past year, protectionist threats and actions have sent stocks downward, but investors have been all too willing to believe the threat has passed at the first sign of an abatement in trade drama. For example, after downward pressure on stocks caused by trade worries, Chinese President Xi Jinping’s conciliatory speech at the Boao Forum in March was all investors needed to hear to send stocks upward. But the elation was short-lived, as it soon became clear that President Xi had no interest in making serious concessions.

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Capital market assumptions: How we estimate asset-class returns

Our views of equities, fixed income and alternatives shape our multi-asset portfolios and inform our clients

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Europe: 5 Scenarios for Investors to Watch


October 3, 2018
Subject | Industry views | Institutional | Invesco | Macro views

The future of the euro and that of the EU are inextricably tied according to our latest white paper, I co-authored with Jacek Rostowski, a former Deputy Prime Minister and Finance Minister of Poland. The big question for us is how could today’s political landscape impact the region in the coming months and years – and what does that mean for investors?

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Five things to watch in October

Perhaps the biggest news of the last week was the meeting of the Federal Open Market Committee (FOMC), the policy-making arm of the U.S. Federal Reserve (Fed). As expected, the Fed raised interest rates. But what was far more interesting were the hints provided about the future. In this blog, I discuss my outlook for the Fed and highlight five issues to watch in October.

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Fed continues gradual hikes

The U.S. Federal Open Market committee (Fed) hiked the federal funds rate by a quarter percentage point at Wednesdays meeting. This is the third rate hike this year, putting the new target range at 2.00%-2.25%. The market had fully priced in today’s move well ahead of the meeting.

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When numbers aren’t enough


September 10, 2018
Subject | Industry views | Institutional | Invesco | Macro views

ESG investors must demand more than headlines from their asset managers 

Ever since the United Nations-supported Principles for Responsible Investment (UNPRI) introduced the term ESG integration back in 2006, the investment industry has sought to make it easier to identify which companies are addressing environmental, social and governance issues and which ones aren’t hitting the mark. That search has led to a proliferation of assessment tools that purport to add clarity for asset owners but instead have reduced the ESG engagement process to box-ticking. It’s an exercise that doesn’t generate any meaningful insights for investors looking to do the right thing.

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Factor Investing: The Third Pillar of Portfolio Construction

Even though it’s been around since the 1950s, factor investing is only just now gaining a toehold in the portfolios of some of Canada’s most sophisticated pension portfolios. As that happens, plan sponsors can gain a new window into asset allocation to better understand how their portfolios work in different market conditions.

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What currency pressures in Turkey and other countries may mean for investors


August 14, 2018
Subject | Institutional | Invesco | Macro views

Activity in currency markets has more than tripled in the last two decades. Between 2001 and 2016, global turnover in currency markets rose from $1.2 trillion to $5.1 trillion,1 and the geopolitical disruption of the last two years has increased currency activity even further. Last week brought several significant examples of this trend in the U.K., China, Iran and – most dramatically – Turkey. Is this a sign of more disruption to come?

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