Invesco Canada blog

Insights, commentary and investing expertise

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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No holiday in sight for global disruption


December 17, 2018
Subject | Institutional | Invesco | Macro views

At the start of 2018, I warned about two significant forms of disruption that posed risks to markets: geopolitical disruption and monetary policy disruption. The solution to the global financial crisis – experimental monetary policy – had created greater wealth inequality, which had led to geopolitical disruption, and the situation was poised to worsen in 2018. This experimental monetary policy, especially large-scale asset purchases, was beginning to be unwound – and that was an experiment in and of itself which also had the potential to cause disruption.

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Fixed income: Gauging the ripple effects of softening economic growth

Key takeaways

  • In the US, we believe peak levels of growth are behind us and expect to see slowing in the second half of 2019.
  • Outside the US, there are also signs of softening growth.
  • Inflation is likely to increase somewhat, but we do not believe that wage inflation will be significantly passed through to consumer prices in 2019.

Global macro

In the US, we believe peak levels of growth are behind us, although we expect annual growth of around 2.75% to persist through the first half of 2019 before slowing.  Fiscal stimulus is still having a positive effect on growth, but will likely wane in the second half of 2019.  In addition, the positive financial tailwinds that have been driving the economy may turn more neutral as monetary policy continues to tighten.  Therefore, while consumer spending will likely be additive to growth in the first half, as the boost from tax cuts winds down, the question is how much will the consumer want to spend thereafter? Consumption has grown at an unsustainably high level, in our view, over the last several quarters, driven by stronger consumer confidence and tax cuts. A meaningful slowdown in consumption could have negative implications for broader growth.  These effects mean that risks to economic growth are higher in late 2019 than they have been in previous points in the cycle.

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Global markets, financial district

Exchange-traded funds: Strategies for mitigating the new risks of the new year

Key Takeaways

  • We see new risks on the horizon for both equity and fixed income investors, but there are various exchange-traded fund strategies that we believe can help.
  • We expect that a loss of profit momentum in 2019 could lead to increased volatility and correlations, and we believe that the Low Volatility and Quality factors may perform relatively well in such an environment.
  • With the overall climate still tilting in the direction of higher rates in 2019, one way to potentially manage that risk is to build bond ladders using defined-maturity bond funds.

In the new year, we see new risks on the horizon for both equity and fixed income investors. Equity markets are anticipating a loss of momentum for corporate profit growth. And, for the first time in 12 years, fixed income investors are forced to wrestle with the challenge of navigating a multi-year upward trend in interest rates at both the short and long end of the bond universe. There are various exchange-traded fund strategies that we believe can help with both challenges.

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Walking sculpture, Magic Mountain, Angerpark

Stock losses snowball across the globe in a December sell-off


December 6, 2018
Subject | Institutional | Invesco | Macro views

U.S. stocks began a dramatic sell-off on Tuesday that has continued and spread to other parts of the world, creating intense headlines across the globe on Thursday. There has been a flight to the perceived safety of sovereign debt. The yield on the 10-year U.S. Treasury fell dramatically, from more than 3% at the start of the week to 2.83% as of this writing1 – and other major sovereign debt yields also followed suit. Some areas of the yield curve inverted, and the 2-year/10-year yield curve is in danger of inverting.

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‘Tis the season for tax-loss selling


December 5, 2018
Subject | ETFs | Invesco | Tax & Estate

As the year-end approaches, many investors with taxable accounts may be seeking to dispose of securities that have lost money. The strategy of tax-loss selling allows the investor to claim a capital loss, which offsets capital gains for the current year. Any unused net capital losses can then be applied against taxable capital gains in any of the three preceding years, or carried forward indefinitely to future years. To realize capital gains and losses in 2018, trades must be executed by Thursday, December 27 to ensure settlement by Monday, December 31, the last business day of 2018.

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Central banks to the rescue? Don’t count on it.


November 27, 2018
Subject | Invesco | Macro views

Stocks continued to slide last week, and most major indices are negative for the year-to-date period – some having posted double-digit losses. As I noted in my commentary last week, there are hints of an economic slowdown appearing. In this environment, expectations are increasing that central banks may loosen their monetary policy in response, but I’m not sure that central banks will come to the rescue this time. In fact, I believe central banks are more likely to be a risk factor going forward.

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Five issues for investors to watch


November 13, 2018
Subject | Invesco | Macro views

Last week, the U.S. experienced a deepening split in political leadership, which dominated headlines. And yet, that was just the tip of the iceberg in terms of events that are impacting global markets. Below, I recap five key events from last week and highlight five issues to watch moving forward, including whether there are grounds for new alliances among U.S. President Donald Trump and the Democratic House.

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The U.S. midterm results are in, but what do they mean for markets?


November 7, 2018
Subject | Invesco | Macro views

Going into yesterday’s U.S. midterm elections, our base case scenario was that Democrats would take the House while Republicans would retain the Senate. That has come to fruition, and has had an initially supportive effect on markets, with U.S. stocks and bonds supported and the dollar weaker. This U.S. market response has in effect eased global financial conditions, supporting other currencies and financial markets in general, including emerging markets.

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Currency outlook: Convergence of global economic forces may cause weakening of U.S. dollar


October 3, 2018
Subject | Macro views

Trade negotiations between the U.S. and Canada were resolved on September 30. The resolution reduces a major headwind for the Canadian economy. Second quarter GDP growth showed a rebound from first quarter weakness, and the positive outcome on trade should increase future growth estimates at the margin.

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Fed continues gradual hikes

The U.S. Federal Open Market committee (Fed) hiked the federal funds rate by a quarter percentage point at Wednesdays meeting. This is the third rate hike this year, putting the new target range at 2.00%-2.25%. The market had fully priced in today’s move well ahead of the meeting.

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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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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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Six issues driving global markets


July 10, 2018
Subject | Institutional | Invesco

As I write this, early on July 9, global stocks have hit a two-week high1 and the price of copper is rallying. Markets are clearly focusing on positive data at the moment, which is a welcome change. Below, I highlight six important things that happened last week – both positive and negative – and several upcoming issues to watch.

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