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Invesco Canada blog

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Macro views

Measure twice, cut once: Fed delivers expected cut


August 1, 2019
Subject | Invesco | Macro views

The U.S. Federal Reserve (Fed) cut rates by 0.25% for the first time in over a decade,1 a move largely expected by the market. Heading into the July Federal Open Market Committee (FOMC) meeting, much of the debate was around whether or not the Fed would deliver 25 or 50 basis points. However, we were focused on the statement and Fed Chairman Jerome Powell’s press conference for further insight on future policy. Future policy, or the Fed’s reaction function, is particularly important as we navigate in an environment where we believe market pricing indicates more cuts than our economic outlook would imply.2

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This week the Fed will remind us that it’s the world’s central bank


July 29, 2019
Subject | Invesco | Macro views

Back when I was in high school, I worked as a lifeguard. I thought it would be a great job, with an opportunity to get a tan and do some summer reading. However, it was a lot of responsibility for a 15-year-old, and I found myself running around with a first aid kit, bandaging cut toes and knees, and even having to perform a water rescue in my first few weeks on the job. I soon realized that I could save myself a lot of trouble, especially since I hated the sight of blood, if I strictly enforced the rules – like no running in the pool area – in order to pre-empt accidents and other mishaps.

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Don’t be so negative: Finding value in U.S. corporate bonds


July 25, 2019
Subject | Institutional | Macro views

As yields across the globe plummet, many investors are now actually paying someone to take their money. Currently, there are more than US$12 trillion of bonds with negative yields outstanding which equal 24% of the global bond market.1 In Europe, the search for positive yield is especially challenging. Over half (51%) of the European bond market now yields a negative rate.1 Germany recently issued €5 billion of bunds at a price of €101.5, but these will only return €100 in two years with zero coupons paid.2 And according to Reuters, Austria is also rumoured to be planning to issue a 100-year bond at roughly 1% to feed yield-hungry investors.

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Waiting for a rate cut: How much is too much?


July 16, 2019
Subject | Institutional | Invesco | Macro views

As any parent of toddlers or teenagers knows, there’s often a big difference between what kids want (candy and a later bedtime) and what they need (vegetables and plenty of rest). I’m reminded of this as I anticipate this month’s Federal Reserve (Fed) meeting. A cut is widely expected — but what is the level that markets need, versus what they want?

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Global trade issues force Bank of Canada to wait and watch


July 10, 2019
Subject | Macro views

The Bank of Canada (BoC) kept the target rate at 1.75% at its July 10 meeting. The tone of the statement was positive on the Canadian economy itself, but was extremely cautious regarding the potential impact of global trade tensions.

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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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Navigating the low interest rate environment


July 3, 2019
Subject | Invesco | Macro views

The most recent monetary policy meetings from the Federal Reserve (Fed) and European Central Bank (ECB) laid the ground work for a new round of interest rate cuts and potential quantitative easing (QE) in Europe. This comes as global central banks are trying to get in front of softening economic data and disappointing inflation measures.

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Algorithm Wars

The U.S. cycle breaks a record. So now what?


July 2, 2019
Subject | Invesco | Macro views

Kristina: As of July 1, the U.S. business cycle has set a new record for longevity. It’s a significant milestone, to be sure, but what does it really mean for investors? The answer might not be what you think. To help put this cycle into context, I’m turning over this edition of Weekly Market Compass to my colleague Brian Levitt, Global Market Strategist for North America.

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The superiority of Canadian Corporate Credit


June 27, 2019
Subject | Invesco | Macro views

Canadian companies continue to benefit from a strong earnings growth backdrop, especially in domestic facing sectors of the economy. Demand for new bond issuance remains exceptionally strong, highlighted by the recent all-time record number of buyers1 for a 10-year bond issued by Telus Corporation. In a world of a growing stock of negative-yielding debt, demand for high-quality, I believe positive-yielding bonds should continue to be well supported.

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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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Canadian yield curve points to slow growth, not recession


May 29, 2019
Subject | Invesco | Macro views

The economic implications from an inverted yield curve may be overstated, in our view. Historically, when short-term interest rates, anchored by central bank policies, yield more than longer duration maturities the bond market is signaling that monetary policy has become restrictive. Taking on more interest rate risk in your portfolio for less yield to maturity is an unattractive option for investors.

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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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