Factor use is growing among financial advisors and institutional investors

Our new global study examines trends in factor investing around the world

Time to read: 2 min

Factor investing is growing rapidly — not only are more investors adopting factor strategies, but as investors gain experience, they increase their use of them. This is one of the key findings from our recent Global Factor Investing Study, which is based on face-to-face interviews and discussions with more than 300 institutional and wholesale factor investors around the world — including financial advisors, pension funds, private banks and insurance companies.

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A preferred approach to US REIT investments

Making the case for US REIT preferred stock in flexible real estate portfolios

Time to read: 5 min

When investors seek to take advantage of publicly listed real estate opportunities, they often favor traditional REIT common stock to gain exposure. This makes sense — from Oct. 1, 2008 through Sept. 30, 2018, US REIT common stock has provided attractive returns coupled with income generation, potential diversification benefits and a potential hedge against inflation.1 However, we believe US REIT preferred stock may offer a unique opportunity for investors to access real estate-like returns with even higher income (and lower volatility) versus traditional REIT common stock.

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During market drops, the Low Volatility factor has outperformed

Lowering ‘down capture’ can help ease the impact of dramatic market swings

Nick KalivasTime to read: 2 min

In 2017, the S&P 500 Index did not experience any corrections greater than 5%. So far in 2018, there have been three such market drops. So which year represents the more typical investor experience? History shows us that the relative calm of 2017 was an outlier, and that losses and volatility are recurring events that investors should be prepared for.

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Venture forth in emerging markets, but be cautious on funding risks

We see selective value in fixed income with more to come as the US dollar eases

Time to read: 4 min

A tightening of financial conditions, led by US Federal Reserve (Fed) rate hikes and an appreciating US dollar, have pressured emerging market (EM) assets so far this year. However, Invesco Fixed Income believes that concern over a generalized “crisis” in EM external debt (and external vulnerability) is largely unwarranted. That said, structural impediments are likely to limit EM growth over the medium term – particularly in the context of a stronger US dollar. We believe there is selective value in EM right now in markets that have been unjustifiably impacted by tightening US dollar funding conditions.

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Five issues for investors to watch

Weekly Market Compass: Can a split US Congress find agreement on policy? Is India due for a central bank shakeup?

Time to read: 6 min

Last week, the US 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 US President Donald Trump and the Democratic House.

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

Assessing the impact of the US midterm elections on four key areas

Arnab DasTime to read: 6 min

Going into yesterday’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 US stocks and bonds supported and the dollar weaker. This US 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: China may intervene if renminbi/US dollar exchange rate reaches 7.0

Invesco Fixed Income shares its views on currencies around the world

Time to read: 3 min

US dollar: Neutral.

We believe the dollar is caught between two macro trends. On the one hand, US growth has positively diverged from the rest of the world, leading to increased interest rate differentials. Higher growth and larger interest rate differentials are typically positive for the US dollar. On the other hand, the US is running large budget and current account deficits. We believe these dueling factors will keep the US dollar in a holding pattern in the near term, but we expect the budget and current account imbalances to eventually drive it lower.

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Interest rate outlook: US markets may price in slower growth in the second half of 2019

Invesco Fixed Income shares its views on rates around the world

Rob WaldnerTime to read: 4 min

US: Neutral.

We expect US interest rates to remain range-bound due to moderating gross domestic product (GDP) growth and looming US Treasury supply. Growth over the next few quarters will likely be driven by consumption and capital expenditures supported by US tax reform. We believe the market will begin to price in a less positive growth picture in 2019, as the effects of tax stimulus wear off and the impact of tighter Federal Reserve (Fed) policy begins to take hold. We could see below-trend growth in the second half of 2019. Additionally, core US inflation has begun to soften, and in the coming months we expect softer rental and service inflation to drive core consumer price inflation below 2% (excluding tariff-related price increases). In addition, US Treasury supply has continued to increase in 2018 while Fed purchases have declined. This combination has led to increased volatility in the Treasury market.

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Despite lower GDP growth, European earnings may accelerate in 2019

Brexit uncertainty has captured the headlines, but we are constructive on quality growth holdings

Time to read: 3 min

For months, Europe has grappled with geopolitical uncertainty in the form of ongoing Brexit negotiations (which face a looming March 2019 deadline) and Italy’s populist coalition government. In this environment, UK companies have appeared less likely to invest — which could lead to lower European growth levels next year.

So what do Brexit doubts mean for our team’s Earnings, Quality, Valuation (EQV) outlook for the UK and eurozone? Let’s begin by dispelling three myths about the area.

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Managing interest rate risk with bond ladders

Defined maturity ETFs can help investors build diversified bond ladders

Time to read: 3 min

For the first time in 12 years, 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. Bond laddering is a timeless strategy used by generations of investors to help manage the risks associated with future changes in market interest rates. But bond laddering has become markedly more difficult to implement in the decade since the financial crisis. In this blog, I explain the potential benefits of bond laddering, and tools that can help with the difficulties.

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