Floating rate strategies allow fixed income investors to pursue yield while potentially reducing rate risk
Interest rates have been on the march since late January, thanks largely to global rate markets and a looming US Federal Reserve. In general, bonds are vulnerable to falling market prices as a result of higher rates, but there are income investments that can be used to take advantage of, rather than fall victim to, rising rates. They’re known as floating rate instruments.Read More
The dollar is up and the euro is down, but our focus on stock selection doesn’t change
Currency volatility has continued to be a clear theme so far in 2015. As the US Federal Reserve has ended its asset purchases, the European Central Bank has launched aggressive monetary stimulus and quantitative easing (QE), and the Bank of Japan has continued its aggressive monetary policy. The result: Further strengthening of the US dollar and a significant weakening of the euro and a relatively flat yen.
The volatility hasn’t been limited to developed markets. In emerging markets, the Russian ruble is down 40% and the Brazilian real is down 29% over the past year.1
Given this volatility, I’m often asked how our International Growth strategy manages these movements. The answer hasn’t changed over the 23-year history of the strategy: We don’t hedge for currency exposure, and we never have.Read More
Market signals lead to a substantial tactical shift for Invesco Balanced-Risk Allocation strategy
Every month, the portfolio management team for the Invesco Balanced-Risk Allocation strategy examines the market’s signals for stocks, bonds and commodities, and makes tactical adjustments in an effort to enhance returns. In recent weeks, our tactical signals for government bonds have led us to substantially reduce our exposure and adopt an underweight position.Read More
The election resolved some short-term unknowns, but Britain’s role in Europe remains uncertain
The British election has delivered a stunning set of results, mostly unpredicted by the pre-election polls. Whatever the explanation for these forecasting errors (e.g., “shy Tories” not disclosing their true feelings to pollsters), the recovering economy and the lack of trust in the Labour program have played a large role in returning David Cameron and his Conservative Party to Downing Street.
Gains of over two million jobs in the past five years — combined with low inflation and the start of real wage gains for the first time since the recession of 2008 and 2009 — will all have played a role in shaping voters’ preferences for a party that has put economic credibility and the restoration of sound public finances at the top of its priorities. In addition, economic surveys show that consumer confidence is at a three-year high, while the consensus forecast of economists for UK real gross domestic product (GDP) growth is 2.6% in 2015 — a rate far ahead of most of the eurozone. All these factors will have contributed to Mr. Cameron’s unexpected victory.Read More
A new strategy seeks to provide growth potential while mitigating volatility and currency risks
In recent weeks, I’ve discussed increased US market volatility—some of which is due to eurozone uncertainty. Invesco PowerShares believes the long-term outlook for European stocks is favorable. The eurozone accounts for just over 17% of global GDP – second only to the United States – and the strength of the US dollar relative to the euro has made European exports more affordable in world markets. I expect a devalued euro, coupled with more stimulative monetary policy, to give a lift to European stocks well into 2016.
Near-term, however, investors in European equities may experience a bumpier ride.Read More
The economy continues to dim, but our long-term outlook brightens
Strong headwinds in Brazil have recently blown its stock market off course. In the first quarter of 2015, Brazilian equities fell more than 15% in US dollar terms, as measured by the Bovespa Index. While current forecasts do not see these storms abating any time soon, our team finds reasons for optimism over the long term.Read More