Three reasons to consider bank stocks

Valuations and regulations are among the trends that we’re watching in this industry

Nick KalivasBank stocks have spun their wheels for most of 2017. Year to date through June 9, the KBW Bank Index (BKX) had risen 3.03% compared to 9.61% for the S&P 500 Index. Banks fizzled as the reflation trade faded and the outlook for fiscal stimulus and meaningful regulatory changes was delayed by the political situation in Washington, DC. However, I believe the banking industry may warrant another look for three reasons:

Continue

What do market benchmarks measure?

Part 1: Exploring the truth about benchmark investing

Let’s say you just moved into an area where local sports fans follow several baseball teams — like the Cubs and White Sox in Chicago, or the Mets and Yankees in New York. Obviously, you want to cheer for a winner, so you pick your new club based on how well they did in 2016. When they suddenly begin to flounder, you discover that the team had a handful of superstars who all got hurt or were traded, and the team is now mediocre in their absence.

Now apply that to investing.

Continue

MSCI to add China A-Shares to emerging markets index: What does it mean for investors?

The decision brings better representation of the entire Chinese economy

After four years of discussions, on June 20, 2017, MSCI announced a ”yes” decision on including China A-shares in the MSCI Emerging Markets Index, which tracks $1.6 trillion1 worth of assets around the world, and related indexes.2 The decision is seminal because it provides previously unavailable A-share exposure in emerging markets (EMs) and global indexes. The initial weight of China A-shares in the MSCI Emerging Markets Index upon the August 2018 inclusion will be 0.73% (2.49 % in the MSCI China Index), comprising 222 onshore-listed stocks. The number of stocks is higher than the originally proposed 169 stocks in March’s consultation paper.

This change is

Continue

Turkey: An economy at a crossroads

Its past included strong growth. Its present is in turmoil. What might the future hold for Turkey?

John GreenwoodIt is not a stretch to say that Turkey is beset by troubles both external and internal. Syria’s civil war to the south has caused an unanticipated economic and social strain on the country, and fears of continued terrorism have slowed the engine of tourism. Meanwhile, the government is seeking to bolster its power after an unsuccessful coup attempt last July. How the country handles these myriad issues could set the stage for either an economic recovery or a further descent into crisis.

Syrian civil war stresses

Turkey shares a 500-mile border with Syria, and it is estimated that over three million refugees have found their way north since hostilities began six years ago. Absorbing such an influx would be

Continue

Weekly Market Review: The Fed takes on the elephant in the room

Markets brace for the long, slow — and potentially risky — process of balance sheet normalization

Last Wednesday, the Federal Reserve announced it would raise the fed funds rate by a quarter point — its fourth rate hike since starting to tighten in December 2015. This was very much expected and created no surprises for investors. But the far bigger news coming out of the Federal Open Market Committee (FOMC) meeting is that the Fed released its plan to normalize its balance sheet. And with that, the Fed has finally addressed the elephant in the room.

Continue

Fed hikes interest rates despite soft inflation

The central bank also surprises markets with a plan for balance sheet unwinding

CorumJames Ong

As was widely expected, the Federal Reserve (Fed) hiked its benchmark interest rate by 25 basis points today to a range of 1% to 1.25%. While the rate rise was almost 100% priced into the bond market, the Fed’s formal statement leaned hawkish with the unexpected announcement of a plan to scale back its asset reinvestment program by not replacing assets as they mature. The market had not been expecting an announcement on the Fed’s “balance sheet unwinding” plan for another several months.

Ahead of this surprise,

Continue

Commodities: Time to buy when others are selling?

As outflows increase, oil fundamentals are strengthening

As I travel around the country to meet with institutional clients, I often hear this question: “What is everyone selling? Because that’s something I’m really interested in buying.” These are clients who have the confidence and experience to contradict the herd mentality that causes many investors to chase market returns (which often results in buying near market tops while selling near market bottoms).

That question is my cue to start talking about commodities. 

Continue

Weekly Market Review: Politics takes center stage

We examine last Thursday’s trifecta: The UK election, Comey’s testimony, the ECB decision

Last week saw a number of geopolitical risks rise to the fore. For the second June in a row, the UK stunned the world with the outcome of its election. When British Prime Minister (PM) Theresa May called for elections two months ago, it was to strengthen her hand in negotiations regarding the UK’s Brexit from the European Union (EU) as it was expected that her party, the Conservative Party, would increase their seats in Parliament. Instead, it has dramatically weakened her hand. As with last year’s Brexit election, the immediate reaction was negative. The pound fell, stocks sold off briefly, and pundits concluded that the United Kingdom has been thrown into “chaos.”

However, despite the surprising outcome,

Continue

UK voters deliver another election surprise

A ‘softer’ Brexit looks more likely as the Conservative Party loses power

Arnab DasConnery_Sean_se_150dpi_RGB

One year after the Brexit referendum and two years after the Scottish independence referendum, UK voters have surprised the country and the markets once again, with a dramatically different election outcome than suggested by almost every poll: Instead of an enlarged Conservative Party majority, which Prime Minister (PM) Theresa May wanted to see, the result of the June 8 general election is a “hung parliament” — no party controls a majority.

Thus, the election implies uncertainty and profound challenges for governing the UK in general and negotiating Brexit with the European Union (EU) in particular — and by extension for UK macro and market performance. That said, Invesco Fixed Income believes this latest political shock is more of an idiosyncratic story for the sterling currency and UK government bonds (gilts) than the sudden, but ultimately transitory, global financial shock triggered by the Brexit referendum a year ago.

Over the longer term, however, we believe the UK

Continue

Weekly Market Review: US jobs disappoint and UK voters head to the polls

General election results could shape the path of Brexit negotiations

Last week, the US jobs report for May took center stage in terms of economic data. Nonfarm payrolls grew just 138,0001 — well below expectations and certainly not what was indicated by the ADP National Employment Report released earlier in the week,2 which showed payroll growth of 253,000 in May. Employment disappointment extended back to the previous two months. The April nonfarm payrolls number was revised down from 211,000 to 174,000, while the March jobs report was revised down from 79,000 to an even more anemic 50,000.1

However, this lackluster payroll growth should not be surprising given that

Continue