Invesco Canada blog

Insights, commentary and investing expertise

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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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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