Invesco Canada blog

Insights, commentary and investing expertise

Portfolio positioning for a recovery scenario

In response to numerous client questions about portfolio positioning for a recovery scenario, we provide a historical perspective on stock market, sector, size, style and regional allocations. Also, we juxtapose typical recovery performance trends against recent price action.

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Portfolio managers examine the impact of COVID-19

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.

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Tactical Asset Allocation Views – May 2020

Our macro regime framework continues to signal that the global economy and all its major regions and countries are in a contraction regime. As widely expected, the economic data are beginning to reflect the disruption caused by quarantines and lockdowns, resulting in a significant deterioration in our leading economic indicators, which we expect to continue for some time. While global market sentiment has stabilized over the past month, it remains in a downward trend, suggesting markets are still expecting downward revisions to global growth expectations. As previously discussed, we believe this macro environment warrants a defensive portfolio posture. We have not made major changes to our asset allocation and continue to favour an overweight exposure in investment grade credit and defensive equity factors.

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Seeking value in emerging markets: China

Our team joined a webinar with over 800 participants, a significant turnout that was not unexpected given the current market environment.
 
As a follow-up to the call, we’ve received numerous questions from participants, with the vast majority pertaining to China. There was also some interest in India, Mexico and Brazil, which we will address in an upcoming blog post.
 
Growing investor interest in emerging markets has been driven by China successfully flattening the COVID-19 transmission curve and being one of the first countries to see signs of a recovery.
 
Conversely, many other countries are still struggling to control the virus, with their economies continuing to deteriorate. These developments make emerging markets potentially more intriguing to investors.

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Why there’s little point in asking whether the stock market will retest lows

To retest or not to retest – that is the question. Indeed, if Hamlet were around today he may be wondering whether the broad U.S. equity market, after posting the second best 25-day rally on record (trailing only 2009’s), will retest the initial market low hit on March 23 of this year.1 To many investment professionals, a retest of the market bottom is a foregone conclusion. In fact, a poll of financial advisors conducted in early April revealed that 81% expected the U.S. equity market to retest the March 23 low.2

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Video: Bank loans’ senior, secured status has helped during crisis

Investors who’ve been rattled by volatility in their fixed income portfolios may be seeking assurance about their underlying holdings.

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As the U.S. passes more stimulus, disagreements loom on what comes next

For months, I have talked about the importance of policy in combatting the COVID 19 crisis: health policy, monetary policy, and fiscal policy. All three prongs need to be adequate and effective in order for the US economy to recovery quickly. While the Federal Reserve has bent over backwards to provide accommodation to support the US economy and markets, fiscal stimulus is still a work in progress.
 
In this week’s commentary I talk with Andy Blocker, Invesco’s Head of US Government Affairs, who breaks down where we are today in terms of fiscal policy – and what to expect next.

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Long-term investors need to be realistic rather than overly optimistic

The recent market sell-off was most pronounced in lower quality, more economically sensitive areas of the market, such as energy, materials, financials, industrial manufacturing and travel related businesses (i.e., airlines, cruise operators, etc.), which are areas where we find an extremely limited number of investible businesses.

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Tracking China’s recovery and a dire U.S. earnings season

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:

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As earnings season looms, portfolio managers look for long-term opportunity

Earnings season is heating up in earnest, giving investors a clear glimpse into the economic impact of the global lockdowns designed to slow the spread of the coronavirus. While investors brace themselves for bleak business results, we are so glad to see that these lockdowns appear to be working as intended from a public health perspective – many countries show evidence of “flattening the curve” of infections and fatalities. This is leading to the inevitable conversations of how best to re-open economies – a task that will require caution so as not to overwhelm health care resources with a second wave of infections.
 
With all of this as background, our portfolio managers continue to look for ways to guard against the looming risks and to position themselves to find opportunities in the recovery – no matter what path that might take. In this blog, I highlight the perspectives of four Invesco investment experts:

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Tactical asset allocation views – April 2020

The COVID-19 global outbreak that started in early January represents an exogenous shock to the global growth cycle, at a time when the world economy was on the cusp of a new synchronized cyclical recovery. Driven by this shock, our macro framework moved into a global contraction regime in February (i.e., global growth expected to be below trend and decelerate).
 
This regime remains in place today and is broad-based across regions (Exhibit 1). Furthermore, given the increased severity of the lockdown and quarantine measures undertaken by governments around the world, it is highly likely that most, if not all, countries and regions will experience a significant recession in the first half of 2020. Therefore, we expect the economic data to deteriorate meaningfully over the next few months.
 
At this stage it is difficult to determine how long this macro environment will persist. Historically, contraction regimes in our framework have lasted on average six months with wide dispersions, ranging between two and 15 months across all episodes since the 1970s. We will continue to follow the data and the framework as it runs its course, but it is nonetheless valuable to compare the current downturn to recent episodes of financial turmoil, despite meaningful differences in the source of the shock and market imbalances.

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History provides insight on how long a market downturn may last

The Greek historian and general Thucydides famously said, “History is philosophy teaching by examples.” That brilliant observation came to mind when we were thinking about how history can be a valuable guide for navigating volatile market environments.

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Video: Perspective on global equity sell-off

Given the high level of volatility and the recent market selloffs, we thought it would be helpful to provide our perspective on what we have seen in Global Equity markets in February, March, impact on portfolio and what our outlook is.

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Video: Finding opportunities in investment grade bonds

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.

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Where do portfolio managers see opportunities in today’s environment?

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.)

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