The Invesco 2020 Global Fixed Income Study provides hard evidence that a sea change has taken place over the last 18 months with respect to environmental, social, and governance (ESG) approaches in fixed income. The survey polled 159 fixed income professionals worldwide, accounting for around US$20 trillion of assets.1 The study shows significant and universal increases from 2019 to 2020 in terms of incorporation of ESG in fixed income (Exhibit 1).Comments Off on ESG in fixed income: From niche to mainstream
The global financial crisis of 2008 has become a blueprint for how policymakers are acting today to smooth the negative growth and inflation shock from the ongoing health pandemic. Many global central banks have been forcefully pushing liquidity into markets to foster economic stability. Collapsing domestic demand and falling inflation has enabled an environment of co-operation between central banks and governments to ensure liquidity remains abundant and activity levels can be sustained without interruption.Comments Off on Global central banks – The permanent actor
While global economies are slowly reopening, we see the COVID-19 crisis as only magnifying the slow growth and low inflation environment we were in prior to the pandemic, with interest rates remaining low for an extended period.Comments Off on Bond positioning for a potential recovery
On March 23, the U.S. Federal Reserve (Fed) announced its intent to acquire investment grade corporate bonds. The purpose of the communication was to support a market in which sharp price declines were threatening to disrupt the normal functioning of primary (new issue) and secondary market activities. On April 9, the Fed announced an expanded definition of bonds eligible for purchase to include those with investment grade ratings as of March 23, even if they had since been downgraded to high yield, as long as they remain in the BB category.Comments Off on Fed to purchase corporate bonds through ETFs
John Krasinksi of The Office and Jack Ryan fame recently initiated a web series entitled “Some Good News.” It’s a news program devoted entirely to good news. I wish I had thought of that. Since I didn’t, I’m left to borrow the concept. This blog, and subsequent ones in this series, will be devoted entirely to producing lists of good (or less bad) news. After all, as Dwight Schrute says in the episode of “The Office” in which Jim Halpert mockingly takes on Dwight’s persona, “Imitation is the most sincere form of flattery. So, I thank you.”Comments Off on Need some good news? Markets, economy do offer some
As the number of COVID-19 cases continues to rise, so do unemployment rates. And so the world continues to look for balance between implementing public health measures, offering fiscal and monetary stimulus, and opening up economies.Comments Off on Portfolio managers examine the impact of COVID-19
As expected, the U.S. Employment Situation Report for April was abysmal. Unemployment rose dramatically as pandemic lockdown measures were implemented across the U.S., with hospitality and leisure posting the biggest job losses. Amidst all the terrible data, there was one obvious and glaring takeaway: Job losses were concentrated among low-wage workers. In fact, so many lower-paying jobs were lost that wage growth rose markedly, underscoring how hard hit lower-income workers have been by this pandemic.Comments Off on Low-wage job losses fuel the U.S. stimulus debate
Investors who’ve been rattled by volatility in their fixed income portfolios may be seeking assurance about their underlying holdings.Comments Off on Video: Bank loans’ senior, secured status has helped during crisis
Our market strategists weigh in on what drove a recent market rally, how the shutdown will affect the economy and markets, and what additional government support may be coming.Comments Off on How the shutdown might affect the U.S. economy and markets. (Answers to FAQs)
Last week was another momentous one for economies and markets, with particular attention being paid to the economic recovery in China, earnings season for U.S. stocks, and the Federal Reserve’s views on interest rates. Below, my colleagues from the Global Market Strategy Office and I answer some of the most pressing questions we have received from clients in recent days:Comments Off on Tracking China’s recovery and a dire U.S. earnings season
The spread of COVID-19 has created unprecedented market turmoil. While the equity space garners the most headline attention, it’s been a very volatile time for the fixed income markets, particularly within the investment-grade space. In fact, over the last few weeks, we’ve witnessed six out of the 10 largest one-day moves in history.Comments Off on Video: Finding opportunities in investment grade bonds
The three-pronged fight against COVID-19 and its economic impact continues. Central banks are providing monetary policy support to keep banks and markets functioning, national governments are providing fiscal policy support to consumers and businesses, and governments at all levels are taking public health policy steps to contain the spread of the virus. (Not to mention the tireless dedication of the health care workers on the front lines and the scientists searching for treatments and vaccines.)Comments Off on Where do portfolio managers see opportunities in today’s environment?
In last week’s blog, members of Invesco’s Global Market Strategy (GMS) team in Hong Kong, Italy, London, Tokyo and New York shared their on-the-ground insights of the fight against coronavirus from a health care, monetary, and fiscal perspective. Today, we take a deeper dive into the potential implications of the pandemic on U.S. stocks and bonds, as well as the GMS team’s view of asset allocation considerations.Comments Off on Where do stocks and bonds go from here?
The U.S. economy is currently experiencing a “sudden stop” in growth, as efforts to combat the spread of the coronavirus increase. Social distancing will likely have a direct impact on workers and small businesses across the economy. Invesco Fixed Income’s expectations currently are for the U.S. and European economies to contract sharply in the second quarter this year, and this estimate is subject to further revision down if the virus continues its aggressive spread. This very sharp contraction is pressuring all players in the U.S. economy and creating a funding need for corporations, small businesses, and households. It is vitally important that funding needs be met to ensure that the exogenous economic shock the U.S. economy is experiencing does not migrate into a financial crisis, which would likely further pressure economic growth.Comments Off on The coronavirus “sudden stop” needs credit support
Canadian fixed income investors benefit from the one of the highest credit quality bond markets globally.1 In addition to the incremental yield captured by owning Provincial and Municipal debt, the corporate bond market is made up of well-managed investment grade rated issuers. Unfortunately for investors who choose to own the broadly followed Canadian Aggregate bond index, corporate debt only makes up 28% of the total.1Comments Off on Why we embrace “Core Plus”
The coronavirus pandemic is spreading in Europe, the U.K., Canada, and the U.S. – and economic activity is grinding to a halt in some sectors as discretionary spending and activity have been sharply reduced in favour of basic needs. Real-time indicators of demand such as restaurant patronage, traffic, and cellphone mobility data are all down dramatically on a year-over-year basis across several major regional and local economies.
The market response has been equally sharp. Stocks rose and fell dramatically last week, especially on Thursday when the Dow experienced its largest drop since 1987 and the STOXX® Europe 600 Index experienced its largest drop ever. The bond market experienced dramatic volatility as well, with the 10-year U.S. Treasury yield falling to as low as 0.4% last week.1 Markets appear to be experiencing a lack of confidence in the policy responses in Europe and the U.S., and that seems to be continuing into this week.
One of the questions we have been receiving lately is: What is the appropriate policy response? There’s a lot embedded in that question. In the past, we have written about the importance of a three-pronged policy response to coronavirus: 1) public health policy to contain the virus, 2) monetary measures to ensure financial liquidity and functionality, and 3) fiscal support to contain the real economic damage. Combating the crisis from these three angles remains critical today — here’s how we assess progress in these areas across the globe.
Global Market Strategist Brian Levitt provides perspective on the impact of the coronavirus and oil price wars.Comments Off on Answers to FAQs about the recent market disruption