Invesco Canada blog

Insights, commentary and investing expertise

Protectionism tightens its grip


March 13, 2018
Subject | Invesco | Macro views

I’ve been warning for some time about the economic dangers of protectionism and the potential for retaliatory policies that could stifle free trade. Last week, this threat intensified – and that was just the tip of the iceberg in a week filled with market-moving news. Below I highlight five critical headlines from last week and preview what’s ahead.

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The dangers of protectionism


March 6, 2018
Subject | Commodities | Invesco | Macro views

Geo-politics is back in the spotlight, with German Chancellor Angela Merkel finally securing a governing coalition after nearly six months of uncertainty, while Italy embarks on its own period of uncertainty, given the inconclusive results of its election this past weekend. Italy’s voters are following in the recent footsteps of voters in the United Kingdom, the United States, Germany and elsewhere – questioning the “status quo.”

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Five upcoming events that could drive markets


February 27, 2018
Subject | Invesco | Macro views

Markets took another roller coaster ride last week. The yield on the 10-year U.S. Treasury bond rose to 2.95% – a level it hasn’t seen in four years – but then moved lower by the end of the week.1 Stocks also vacillated, largely in response to those Treasury yield movements. It appears that markets are unsettled and primed to react to the news of the day – both negatively and positively. Below, I discuss five upcoming events that could possibly be the catalyst for more moves ahead.

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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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