Invesco Canada blog

Insights, commentary and investing expertise

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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Three key takeaways from four days in Europe


April 9, 2019
Subject | Invesco | Macro views

Last week I had the pleasure of traveling in Europe, meeting with colleagues and clients in several different countries. It was a whirlwind tour, but it was well worth the jet lag to get an in-person account of the various issues facing Europe today. Below, I share three key takeaways from my trip.

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Six issues to watch in April


April 2, 2019
Subject | Invesco | Macro views

The first quarter of 2019 was a wild ride for capital markets — equities and government bonds rallied as U.S. Treasury yields and German bund yields sunk. This was a clear dichotomy, indicating optimism in the stock market but pessimism about the global economy. I believe this reflected more accommodative monetary policy from the Federal Reserve and other central banks, suggesting a more supportive environment for risk assets such as equities, while weakness in some economic data suggested a slowdown in global growth, pushing yields down. In this week’s blog, I discuss six current issues that could impact capital markets in April and beyond.

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A dovish Fed and an inverted yield curve spark market concerns


March 25, 2019
Subject | Invesco | Macro views

Monetary policy disruption was on full display last week: The U.S. Federal Reserve (Fed) announced a momentous change to its normalization plan, the yield curve inverted and sparked investor concerns, and a noted Fed critic was nominated to the central bank’s Board of Governors.

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Politicization: A growing threat to central banks


March 18, 2019
Subject | Institutional | Invesco | Macro views

The United States has always had a difficult, complicated relationship with the concept of central banks. Early on, critics sought to prevent the establishment of a U.S. central bank, while today, politicians in the U.S. and around the world seek to use central banks as tools to further their policy aims. In my view, central bank independence is critical to their ability to counteract the economic effects of geopolitical chaos.

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Change is in the air as the Fed, BOC and ECB pivot on policy


March 14, 2019
Subject | Institutional | Invesco | Macro views

There is an old Chinese proverb that states, “When the winds of change blow, some people build walls and others build windmills.” In other words, some people embrace change while others fear it. I’ve come to the conclusion that the speed of the change has much to do with how a change is received. Just look at the past week, when we saw abrupt changes in the direction of the wind for central banks, followed by largely negative reactions.

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What trade-offs will the U.S. accept for a trade deal with China?


March 7, 2019
Subject | Institutional | Invesco | Macro views

Two key risks – trade and central bank normalization – have had an outsized impact on global stocks for more than a year (sometimes positive and sometimes negative). This past week saw developments in each of these key issues.

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Populist, nationalist movements are on the rise: What could this mean for the global economy?

An informal Invesco poll of North American institutional investors recently revealed that geopolitical risk was a top concern for 2019. And they’re not the only ones worried: European Central Bank President Mario Draghi recently noted that the risks to the downside have increased, blaming, among other things, “the persistence of uncertainties related to geopolitical factors and the threat of protectionism…” In his annual letter to investors in January 2019, Seth Klarman of Baupost warned of the threat of geopolitical disruption: “Social frictions remain a challenge for democracies around the world, and we wonder when investors might take more notice of this.”

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What lies beneath the Fed’s ‘about face’ on normalization?


February 27, 2019
Subject | Institutional | Invesco | Macro views

Last week was momentous for one specific reason: The Federal Open Market Committee (FOMC) released minutes from its January meeting, which detailed the significant “about face” that the Federal Reserve (Fed) has made over the last few months. In my view, the FOMC’s insights, along with apparent progress in U.S.-China trade talks, could enable stocks to move higher in the short term – but I’m also wary of negative implications that could lie beneath the surface.

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Five ‘swords of Damocles’ hang over markets


February 11, 2019
Subject | Institutional | Invesco | Macro views

In Greek mythology, the “sword of Damocles” is a powerful morality tale. King Dionysius is a leader who grows weary of a young sycophant, Damocles, who is constantly extolling the benefits of being king. To teach Damocles a lesson about the pressure and insecurity that comes with leadership, Dionysius allows him to sit on the throne for a day – but over the throne, the king has suspended a large sword, hung by a single hair. Damocles quickly learned what it feels like to be a leader who exists in imminent danger and jeopardy.

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The Fed changes its game plan


February 4, 2019
Subject | Invesco | Macro views

The biggest American football game of the year was played last night, and for the first three quarters, it looked as if both teams forgot how to score a touchdown. But great teams find a way to win, even when their tried-and-true game plan seems to be faltering.

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Global markets: Eight issues to watch this week


January 28, 2019
Subject | Invesco | Macro views

Last week was momentous as experts in Davos warned about the dangers of debt, more signs of a European slowdown emerged and the longest government shutdown in U.S. history came to an end. In today’s blog, I discuss what we learned last week – and highlight eight things to watch during the final week of January.

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Markets grapple with government dysfunction


January 22, 2019
Subject | Institutional | Invesco | Macro views

Last week saw government dysfunction on full display in several different countries. While politicians in the U.K. and U.S. continued to make headlines, expectations for lower economic growth emerged in a report from the International Monetary Fund.

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Investor sentiment stays positive despite geopolitical drama


January 14, 2019
Subject | Invesco | Macro views

There has been no shortage of drama across the macroeconomic and geopolitical landscape so far in 2019. However, it appears that investors may be tuning out much of the political theatre around them. Which storylines are moving markets now, and which may become more integral to the plot in the weeks ahead?

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Is a real winner possible in the U.S.-China trade war?


January 7, 2019
Subject | Invesco | Macro views

Students of history may recall the War of the Roses, which was waged more than 500 years ago. It was an epic battle between two rival branches of the English royal family that both had claims to England’s throne – the House of Lancaster, represented by a red rose, and the House of York, represented by a white rose. While the House of Lancaster ultimately won the War of the Roses, by some measures there was no real winner. The war lasted for many years and resulted in very significant damage to both houses. In fact, by the end of the war, the male lines in both houses had been eliminated.

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