Invesco Canada blog

Insights, commentary and investing expertise

Beyond the yield curve: Other economic indicators to watch


August 20, 2019
Subject | Macro views

Last week, the U.S. Treasury yield curve, specifically the spread between the 10-year U.S. Treasury rate and the 2-year U.S. Treasury rate, briefly inverted. An inverted yield curve is considered to be a good predictor of recession, and so markets sold off on fears that a recession will occur in the next year. However, I believe a U.S. recession is not a foregone conclusion — and so we should monitor the economic data closely. I have received a number of questions from clients and the media about what other indicators to follow to help divine how the economy is doing. The following are just a few indicators to watch — and some caveats:

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Will the inverted yield curve lead to recession?


August 14, 2019
Subject | Macro views

The U.S. Treasury yield curve, specifically the spread between the 10-year U.S. Treasury rate and the 2-year U.S. Treasury rate, briefly inverted on the morning of Aug. 14. As of early afternoon, the spread was roughly 1 to 2 basis points wide. The brief inversion follows the inversions earlier this year between the spread of short-term rates (such as the federal funds rate and the 3-month Treasury bill) and the benchmark 10-year rate.

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You can’t train a great white shark – or control global trade


August 12, 2019
Subject | Macro views

One of my all-time favorite movies is “Jaws,” an iconic American summer movie about a great white shark that terrorizes a seaside New England resort town. Maybe it’s because I like the musical score, or maybe it’s because I like hearing my last name interspersed throughout the movie (a particularly noteworthy line is “Hooper drives the boat, Chief”), but I can be found watching the movie at least several times each summer. In fact, I like the movie so much that I’ve watched documentaries and read articles about the making of “Jaws.” My husband thought that was a strange and ridiculous waste of time, but I actually learned some very interesting factoids.

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Stock market sell-off underscores trade war dangers


August 6, 2019
Subject | Macro views

Monday’s significant market sell-off reflected fears about escalating trade tensions, which caused investors to panic. This sell-off should not come as a surprise to those who recognized that stocks were vulnerable because the market wasn’t fully pricing in trade tensions. I view this as a healthy re-pricing of stocks to more fully factor in the potential that the trade war is likely to drag on.

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This week the Fed will remind us that it’s the world’s central bank


July 29, 2019
Subject | Invesco | Macro views

Back when I was in high school, I worked as a lifeguard. I thought it would be a great job, with an opportunity to get a tan and do some summer reading. However, it was a lot of responsibility for a 15-year-old, and I found myself running around with a first aid kit, bandaging cut toes and knees, and even having to perform a water rescue in my first few weeks on the job. I soon realized that I could save myself a lot of trouble, especially since I hated the sight of blood, if I strictly enforced the rules – like no running in the pool area – in order to pre-empt accidents and other mishaps.

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Waiting for a rate cut: How much is too much?


July 16, 2019
Subject | Institutional | Invesco | Macro views

As any parent of toddlers or teenagers knows, there’s often a big difference between what kids want (candy and a later bedtime) and what they need (vegetables and plenty of rest). I’m reminded of this as I anticipate this month’s Federal Reserve (Fed) meeting. A cut is widely expected — but what is the level that markets need, versus what they want?

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ECB worries have receded, but Fed policy doubts have some pundits on the defensive


July 8, 2019
Subject | Invesco | Macro views

I spent the past week in Knoxville, Tennessee, watching my daughter’s basketball team play in a national tournament. I am the unofficial scorekeeper of the team, which makes the experience even more interesting, as I track the games on a variety of metrics. What I found is that the risks to my daughter’s team were different in each game, depending on the abilities of the opposing team. It reminded me that various market environments present different risks and, just as quickly as one game ends and a new game against a different team begins, so too can environments change.

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Could central banks boost stocks in the second half?


June 24, 2019
Subject | Invesco | Macro views

The Federal Reserve (Fed) met last week and clearly telegraphed that it will no longer be “patient” and that it is leaning toward loosening monetary policy. Why? Fed Chair Jay Powell said trade developments and global growth concerns are on the mind of the central bank. As I look into the second half of the year, those two items are key to my outlook as well – and I believe the willingness of central banks to become more accommodative could be a positive development for stocks.

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Will the Fed lose its patience this week?


June 17, 2019
Subject | Invesco | Macro views

All eyes will be on this week’s U.S. Federal Reserve (Fed) meeting — especially the statement (whether the central bank will retain its “patient” stance) and the “dot plot” (which charts the outlook for interest rates). The June 18-19 Fed meeting is very important because market expectations have gotten so dovish recently. And with risks rising, many investors recognize that once again the Fed stands between them and a more challenging stock market environment.

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Central banks provide a silver lining to the escalating trade war


June 10, 2019
Subject | Invesco | Macro views

A collective sigh of relief was expelled on Friday evening as U.S. President Donald Trump announced he would indefinitely suspend the planned imposition of tariffs on Mexico – which was set to go into effect on June 10. Markets have entered “risk on” mode, given that the crisis was averted. However, we need to recognize that the announcement that the U.S. would apply a tariff on Mexican goods as a way to address immigration was a “game changer.” I believe strongly that just the threat of using tariffs to achieve non-trade policy objectives is very concerning and will likely contribute to a significant escalation in economic policy uncertainty – even though the current situation has been resolved.

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The month of May was a ‘game-changer’ for markets


June 4, 2019
Subject | Invesco | Macro views

It’s the beginning of June, and I haven’t been this happy to welcome a new month in a very long time. I suspect many investors and market watchers have that same feeling. May was brutal for markets — but it was more than just that. The month of May was, in my opinion, a game-changer. So much happened that no one expected to happen:

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What does the fragmented parliamentary election mean for Europe?


May 30, 2019
Subject | Invesco | Macro views

All eyes were on Europe this past week. First, U.K. Prime Minister Theresa May announced her resignation. Then the European parliamentary elections took place. Here are the key takeaways from a momentous week for the European continent.

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Talking tariffs: New tolls threaten to further strain U.S.-China relations


May 13, 2019
Subject | Invesco | Macro views

Last week took investors on a roller coaster ride. The climax came at the stroke of midnight on Friday, May 10, when U.S. President Donald Trump’s newest tariffs went into effect – a 25% toll on $200 billion of Chinese goods. Then later on Friday, the negotiations ended with no material progress, and there are no formal plans to resume talks. What’s more, China retaliated the morning of May 13 by announcing tariffs on U.S. goods being imported to China.

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Brexit: The consequences of economic policy uncertainty

Economic policy uncertainty has for decades been recognized by economists as having the potential to negatively impact economic growth. In 2015, economists Huseyin Gulen and Mihai Ion found that economic policy uncertainty has a strong negative correlation to business investment.1 This built on previous research from the 1980s that showed that high uncertainty gives firms an incentive to delay investment decisions, especially in situations where reversing an investment decision can be costly.2

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Looking for clues on growth


April 22, 2019
Subject | Invesco | Macro views

In the past several months, we have seen central banks make an abrupt turn toward a more dovish monetary policy stance. The initial assumption by markets was that this was a decisive turn. However, more recent communications suggest otherwise. As doubts about economic growth continue to grow, so does uncertainty about the path of policy.

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Can central banks still be effective?


April 17, 2019
Subject | Invesco | Macro views

Last week was a momentous one for central banks – the minutes from the March Federal Open Market Committee (FOMC) meeting were released, giving us insight into the Federal Reserve’s views on the global economy and rate cuts, and the European Central Bank (ECB) decided to remain on its ultra-accommodative path. We were reminded that central banks are critical for supporting growth, controlling inflation and stabilizing economies – a task that is growing increasingly difficult as these institutions become more politicized.

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