Invesco Canada blog

Insights, commentary and investing expertise

Is it time to worry about a liquidity crisis?


July 31, 2018
Subject | Invesco | Macro views

One of the key risks to markets that I’ve been discussing for more than a year is balance sheet normalization. I have argued — and continue to argue — that quantitative easing was a big experiment, and so unwinding it is an experiment in and of itself. Now that balance sheet normalization has been in force for more than half a year, we are seeing its effects. And one key effect is on liquidity.

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Trade wars: A worldwide web of worry


July 24, 2018
Subject | Invesco | Macro views

Global stocks have been in positive territory thus far in July with even emerging markets stocks eking out a tiny gain.1 With positive returns and relatively low volatility in July, it appears that the stock market is not worried about the burgeoning trade war. Admittedly, it’s easy to ignore since investors don’t have a frame of reference for the impact of a major trade war – and so far, earnings season has been very good. But other markets may be telling us that we should be worried.

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Tariffs, earnings and politics: What’s moving markets this week?


July 17, 2018
Subject | Macro views

There is no shortage of events to watch this week: The European Union and China will meet to discuss foreign investment, Russian President Vladimir Putin and U.S. President Donald Trump are meeting in Finland, and U.S. Federal Reserve Chair Jay Powell gives his semi-annual testimony to Congress. But can any of these events direct the market’s attention away from the strong second-quarter earnings season?

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Five risks that could affect fixed income markets


July 12, 2018
Subject | Invesco | Macro views

Invesco Fixed Income is positive on fundamentals for the rest of this year. Global growth is solid and inflation is tame. As central banks have pivoted away from stimulus, tighter financial conditions have hurt risky assets. But major central bank policies are still generally easy – we expect the Federal Reserve to tighten gradually, and the runway for other central banks to normalize policy is still long. Nevertheless, political uncertainty, trade tensions and a sell-off in emerging markets have challenged investors in recent months. We expect these factors to generate further volatility and believe caution is warranted. However, we believe greater volatility will generate new opportunities for fixed income investors against a backdrop of solid macro and credit fundamentals. Below are five risks we are monitoring.

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Interest rate outlook: U.S. inflation should peak this summer


July 6, 2018
Subject | Invesco | Macro views

U.S. growth remains strong, accelerating in the second quarter versus the first quarter’s lackluster 2.2% performance.1 We expect 2018 growth of around 2.8%, with strong contributions from capital expenditures and consumption. Core inflation continues to be benign, and we see it peaking in the next two months at around 2.2%. After that, softer rental and service costs should drive it back below 2%. In our view, the U.S. Federal Reserve will hike one more time this year before pausing in response to declining inflation. Strong growth and lower-than-expected inflation point to a 10-year Treasury yield of around 3%. However, supply dynamics will likely begin to shift in the third quarter as the Treasury begins to issue more long-term debt. This may pressure the Treasury yield curve steeper.

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Six ways the trade situation deteriorated in the past week


July 3, 2018
Subject | Invesco | Macro views

I keep promising myself that I will stop writing about trade and protectionism in my weekly commentaries. And then virtually every week, something happens that forces me to address the topic once again. This past week, unfortunately, was no exception. In my mid-year outlook, I mentioned that my outlook is predicated on the trade situation not worsening materially – so it’s important that we closely follow trade developments. Last week, there were six trade developments that are helping to place downward pressure on stocks:

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Central banks take centre stage


June 19, 2018
Subject | Invesco | Macro views

Central banks took centre stage last week, with a trifecta of major central bank meetings. The clear theme was that most major banks are at least taking small steps toward monetary policy normalization. However, the central banks that are tightening may be caught by surprise if the trade situation worsens – which I believe is a strong possibility.

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Federal Reserve hikes with upbeat outlook

The U.S. Federal Open Market committee (Fed) continued their recent gradual hiking cycle by increasing the federal funds rate by 0.25 percentage points at today’s meeting. The target range after the hike is now 1.75%-2.00%. The financial markets had been fully expecting today’s move.

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Protectionism rears its ugly head again


June 5, 2018
Subject | Invesco | Macro views

The global trade environment seriously worsened last week as the U.S. applied aluminum and steel tariffs to Canada, Mexico and the European Union (EU). Just a few days before, U.S. President Donald Trump announced he is exploring tariffs of up to 25% on imported cars. In my view, this is a very negative development that has implications for the global economy for several different reasons:

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Is Italy headed for an EU exit?


May 30, 2018
Subject | Invesco | Macro views

We have devoted much time in this weekly blog to geopolitical risks. However, I have tried to stress that geopolitical risk, while disruptive, tends not to impact fundamentals – although it can certainly create a lot of turmoil in capital markets in the shorter term. A case in point is the current political situation in Italy, which has worsened over the last few days and thrown into question the country’s future with the European Union (EU).

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What do higher oil prices mean for the stock market?


May 23, 2018
Subject | Commodities | Invesco | Macro views

In the past few weeks, the price of a barrel of oil has risen to its highest level in the last several years, and I believe it is poised to move higher. Lately, I’ve been asked quite a bit about what this means for the stock market. While high oil prices may have an effect on certain sectors and industries, I believe the far greater impact would be indirect – and could happen in several different ways.

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Is the ‘synchronized’ global expansion really in sync?


May 8, 2018
Subject | Institutional | Invesco | Macro views

“Getting long in the tooth” is an interesting way to describe something that is getting old and presumably nearing its end – it refers to the long-time practice of estimating a horse’s age by looking at its mouth. I’ve found myself using this expression a lot these days, as the U.S. experiences its second-longest economic expansion in the last 100 years. But investors should remember that – even as market-watchers talk about “synchronized global growth” – other economies are in much earlier stages of expansion.

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Five takeaways from April and five things to watch in May


May 2, 2018
Subject | Macro views

As April came to a close, we learned some key lessons this month about the likely path forward for central banks, the growing concerns about protectionism, and the market’s sensitivity to any changes in key indicators. Below, I highlight five key takeaways from April, and preview five things to watch in May.

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