After almost doubling since its cycle low in December 2015, the price of gold witnessed a violent shakeout of over 7% in early August. Has the fundamental outlook for the yellow metal changed or should investors buy the recent dip? To answer those questions, we study some of the major drivers of gold prices, starting with sentiment.
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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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Our views of equities, fixed income and alternatives shape our multi-asset portfolios and inform our clients
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In the past few weeks, the price of a barrel of oil has risen to its highest level in the last several years, and I believe it is poised to move higher. Lately, I’ve been asked quite a bit about what this means for the stock market. While high oil prices may have an effect on certain sectors and industries, I believe the far greater impact would be indirect – and could happen in several different ways.
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Geo-politics is back in the spotlight, with German Chancellor Angela Merkel finally securing a governing coalition after nearly six months of uncertainty, while Italy embarks on its own period of uncertainty, given the inconclusive results of its election this past weekend. Italy’s voters are following in the recent footsteps of voters in the United Kingdom, the United States, Germany and elsewhere – questioning the “status quo.”
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Now, for the first time, investors are able to purchase futures on bitcoin, the digital currency. The Chicago Board Options Exchange just began offering derivatives contracts which provide the ability to bet on the future price of this cryptocurrency. The CME Group will also be offering derivatives contracts on bitcoin in the coming week. Investors seem to be excited about this opportunity, sending the price of a single bitcoin thousands of dollars higher in the past several weeks in anticipation of the launch of these futures contracts.
Despite October’s reputation as a precarious month for stocks, the equity markets made it through the month without so much as a hiccup, let alone a correction. Last month commemorated the 30th anniversary of the 1987 market drop, but investors did not get spooked by the supposed “October effect.” With October behind us, it is now an opportune time to keep in mind some of the things we will want to look for in November and beyond.
The past few weeks have seen commodity prices experience some significant swings, with different commodities impacted by different factors. I find that investors have a lot of questions about commodities and what drives them — particularly given all the dramatic weather events over the past few weeks — so this week I’m going to focus on these investments (with a quick note at the end about key events from last week).
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Recently, one of Invesco’s funds – Trimark International Companies Fund – was singled out for praise as an example that true active management can outperform. While the kudos were well-deserved for the team, it appeared as part of a commentary that was otherwise unsympathetic to active management.
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The basic principle that guides our portfolio construction is combining asset classes that we believe will perform well in at least one of the main economic environments. The goal of this approach is to have elements of the portfolio that are performing well in various scenarios – helping buoy results in more difficult times.
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Historically, the Invesco International and Global Growth team has taken an underweight position in the energy sector because we believe that over the course of an economic cycle, few oil-and-gas producers can consistently earn above their cost of capital. Additionally, we see many management teams prioritize volume growth over returns – a strategy that eventually pushes prices down to or below the median break-even cost curve. But after the recent carnage in the oil markets, we’re beginning to dust off some of our energy-company files in search of opportunities.
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Question: With investor concerns about China, interest rates and oil prices taking centre stage and valuations considered fairly valued, how do you view the oil and gas sector today? Are you currently invested in oil and gas companies in Trimark Europlus Fund?
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