Invesco Canada blog

Insights, commentary and investing expertise

Currency outlook: CDN overvalued, USD mixed

The Canadian dollar was reasonably strong until the first week of March, when the U.S. Federal Reserve (the “Fed”) began telegraphing the prospects of a rate hike at its March meeting. The Bank of Canada has appeared to continue to favour a somewhat weaker currency in spite of some strong economic data, including very strong full-time employment reports. Our opinion remains that the Canadian dollar is overvalued and we favour being short the currency.

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Interest-rate outlook as global growth improves

The 10-year Canadian government bond yield has retreated from its 2017 peak yield of 1.87% and currently sits in the middle of this year’s range of 1.61% – 1.87%.1 Economic data has generally been picking up this year with employment growth showing particular strength. The Bank of Canada has kept policy on hold recently, but remains wary of persistent economic slack. We believe the current trading range is likely to persist unless global economic growth picks up further.

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Why we are not afraid of the Fed

The Federal Reserve (Fed) raised interest rates in March and is likely to raise them again twice this year, yet the financial markets have taken this news in stride. Why is this? Simply put, the Fed is behaving dovishly, considering the positive growth pattern we are seeing.

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Finding defensible yield as the profit cycle turns


April 11, 2017
Subject | Active management | Invesco | Macro views

As dividend income investors, we are focused on sustainability of profit margins over a full cycle. I believe that we are currently in the later stages of the profit cycle, with corporate profit margins at about 1% below their late-2014 peak levels. What does that mean for us as high-conviction, bottom-up investors?

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A high-conviction approach to dividend income


April 10, 2017
Subject | Active management | Invesco | Macro views

Investors in today’s market are navigating a series of “what ifs” – potential policy shifts from the Trump administration in the U.S., interest-rate changes and uncertain global growth rates. I believe that a long-term, high-conviction approach to dividend investing is an asset in today’s short-term-focused, myopic markets.

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