Invesco Canada blog

Insights, commentary and investing expertise

Good news is bad news: Deconstructing the market sell-off


February 13, 2018
Subject | Institutional | Invesco | Macro views

Stocks globally have experienced more than a week of tumultuous trading, with the U.S. stock market officially in correction territory. And after being relatively sedate for years, the VIX Index has risen dramatically in recent days, indicating rising volatility. Stocks have moved so far so fast that investors have experienced financial whiplash and are trying to understand what caused markets to change course so abruptly. To put it simply, almost everything that should be a positive for stocks is now a negative for stocks.

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Above-trend growth could cause U.S. inflation later in 2018

Employment growth has been strong enough that the Bank of Canada (BOC) hiked its overnight target rate to 1.25% in January.1 The BOC statement attempted to balance the view that growth was near capacity with concerns that raising rates too quickly could cause the economic expansion to stall. The 10-year yield has broken through its previous peak of 2.15% on the growth story and a modest pickup in inflation.2 We believe yields should continue to move higher from these levels.

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What does market volatility mean for fixed income?

Market expectations of inflation have risen in recent days, after signs of wage growth – often seen as a harbinger of inflation – appeared in the January jobs report. We at Invesco Fixed Income believe investor concerns that inflation is finally showing signs of life have helped drive interest rates higher and impacted credit markets, where worries over higher interest rates (and their potential impact on companies) have caused declines in stock markets and other risky assets.1

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A rising tide for fixed income?

In my recent blog on the impact of the tax reform, I explained why I believe the new tax law should be extremely supportive of the U.S. investment grade (IG) bond market, including provisions that could lead to reduced supply. Looking beyond IG, the news appears to look good for other fixed income sectors as well.

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Lessons from the stock market sell-off


February 5, 2018
Subject | Invesco | Macro views

Last week ended on a bad note. The yield on the 10-year Treasury moved up from 2.695% to 2.852% in just five days,1 spiking on the release of the U.S. employment situation report for the month of January. Not only did yields globally then rise, but this brought on the biggest sell-off in U.S. stocks in nearly two years – which then spread to Europe and Asia, putting downward pressure on equities in those regions. As I write this, futures suggest an extension of the sell-off today.

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Why international stock markets should continue to outperform U.S.


January 31, 2018
Subject | Active management | Invesco

2017 marked only the second time in the last eight years that international markets outperformed the U.S., with the MSCI All Country World Index (ACWI) ex-U.S. returning 27.19%, and the S&P 500 Index returning 21.83%.1 So is this the beginning of a sustained shift in outperformance? On one hand, there is a list of risks facing international markets, from Brexit to a potential slowdown in China. But on the other hand, international companies have recently been trading at a substantial valuation discount compared with the U.S., and we have been seeing strong profit expansion.

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Is the world shifting from connection to economic protection?


January 30, 2018
Subject | Institutional | Invesco | Macro views

Last week offered some stark reminders that we live in a very global and interconnected world. Given how interwoven our international relationships have become, the current trend toward de-globalization carries with it many consequences — and protectionism could become the biggest economic risk of them all.

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Disruption abounds, but will it matter to the markets?


January 23, 2018
Subject | Invesco | Macro views

For the past year, I’ve been talking about disruption as a key theme for the markets and economy. During the past week – with the shutdown of the U.S. government, continued efforts to form a coalition in Germany, and an Olympic agreement coming out of the Korean peninsula – it’s become clear that the theme of disruption remains front and center. Particularly geopolitical disruption.

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BoC hikes again, citing near-capacity growth

The Bank of Canada (BoC) announced today it was raising the target overnight rate by 0.25% to 1.25%. The last time the BoC hiked its target rate was at the September 6 meeting. Market expectations for this rate hike began to increase several weeks ago, so it was almost fully priced into the market.

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Tax reform: A year-end bonus for fixed income?

Despite the near non-stop drama of the legislative process, we ended December with the U.S. Tax Cut and Jobs Act of 2017 being signed into law. What does this mean for fixed income investors? In my opinion, the news is overwhelmingly positive for the U.S. investment grade market; here are four reasons why.

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Getting a read on the Goldilocks economy


January 9, 2018
Subject | Institutional | Invesco | Macro views

Last week saw the release of the latest U.S. employment report, with just 148,000 nonfarm payrolls created in December.1 This was significantly below expectations and the previous month’s reading. However, it may have been a Goldilocks jobs report: It is good enough to stave off any concerns that the economy may be weakening, but it’s not strong enough to suggest that the economy is overheating.

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Ten expectations for 2018


January 3, 2018
Subject | Institutional | Invesco | Macro views

Last year was a strong one for capital markets. Most countries’ stock markets posted positive returns, with many markets, including the U.S., posting double-digit gains. Globally, and in the U.S., the best-performing sector was technology. Energy was the worst-performing sector globally – and was one of the worst-performing sectors in the U.S.1

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Who’ll be watching the punch bowl in 2018?


December 19, 2017
Subject | Institutional | Invesco | Macro views | Trimark

Last week saw a confluence of central bank meetings and decisions over the course of two days. They revealed central banks that are in the process of – or on the verge of – tightening. I was reminded of former Federal Reserve (Fed) Chair William McChesney Martin, who said the central task of his job was “to take away the punch bowl just when the party gets going.” But is the party really just getting going – or is it getting long in the tooth? And, most importantly, who is the chaperone? And how strict are they?

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Fed maintains a slow and steady approach

The U.S. Federal Open Market Committee (the Fed) raised the target Fed Funds Rate by 0.25% to a range of 1.25%-1.50% at today’s meeting. This is the third rate hike this year, although the first one since the Fed announced it was reducing the size of its balance sheet at the September meeting.

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Bitcoin: Digital currency or digital tulip?


December 12, 2017
Subject | Commodities | Institutional | Invesco | Macro views

Now, for the first time, investors are able to purchase futures on bitcoin, the digital currency. The Chicago Board Options Exchange just began offering derivatives contracts which provide the ability to bet on the future price of this cryptocurrency. The CME Group will also be offering derivatives contracts on bitcoin in the coming week. Investors seem to be excited about this opportunity, sending the price of a single bitcoin thousands of dollars higher in the past several weeks in anticipation of the launch of these futures contracts.

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