2016: A big year for small caps

Could the 1980s provide insight into the outlook for small-cap stocks?

Nick KalivasSmall-cap stocks have been hot in 2016. Year-to-date through Nov. 22, the S&P SmallCap 600 Index and Russell 2000 Index rose 23.1% and 19.0%, respectively, while the S&P 500 Index gained only 9.9%.1 Gains were especially strong after the presidential election. Between Nov. 7 (the day before the vote) and Nov. 22, the S&P SmallCap 600 and Russell 2000 indexes gained 12.9% and 12.0%, respectively, while the S&P 500 Index advanced only 3.5%.1

Small caps: Before and after the election


Global equities: Looking for long-term opportunities after a year of surprises

2017 Investment Outlook series

Jeff Everett; Jeff

As 2016 winds down, global investors can reflect on a volatile year, full of surprises. A double-digit correction in the first six weeks welcomed investors into the new year, sparked by a December 2015 rate hike in the US, as well as concerns over the slowing Chinese economy. Post the decline, equities rebounded strongly, aided by global central bank support and surging commodity prices. Emerging market equities benefited most from the rally in commodities and, as of this writing, have outperformed the developed markets during the year after having underperformed significantly for the past five years.1


Italian referendum ‘no’ vote suggests eurozone will muddle through

Vote marks yet another rejection of the status quo in Europe

Arnab DasItalians voted Sunday, Dec. 4, to reject changes to their constitution, leading to the resignation of Prime Minister Matteo Renzi and marking a victory for the country’s populist movement. Polls had suggested that Italian voters would reject the referendum on constitutional amendments to reform the Senate by a margin of about 10%. The turnout at 70% and margin of victory at 18% were both higher than expected.

Italian bonds, bank stocks fall, but rebound quickly


Macro factor framework helps assess new market conditions

Invesco Fixed Income shares its asset class views based on expected changes to three key factors

Waldner_Rob_sm_150dpi_RGBInvesco Fixed Income utilizes a framework based on the idea that changes in growth, inflation and financial conditions drive much of market beta performance, and that understanding these “macro factors” can help us understand market conditions and price action. We believe this macro factor framework is particularly useful today, as we believe these three factors are undergoing changes, and hence market behavior may be different than it has been in the recent past.

Furthermore, changes in these three factors will likely have different impacts on markets. We believe understanding the changes and impact of each factor and how they relate to each other will promote understanding of market moves.

Growth and inflation


US growth stocks: Eight years into a US secular bull market, we see three scenarios for future growth

2017 Investment Outlook series

Ellis_Juliet_sm_150dpi_RGB.jpgA number of years ago, we on the Invesco US Growth Equities team observed evidence that US equity markets were in the early stages of a secular bull market, similar to several other periods in the 1900s when equities rose significantly over a long number of years, and their cumulative, positive returns significantly overwhelmed the impact of intermittent corrections. This perspective is visible only when stepping back to assess very long time periods, and it involves a degree of detachment from the immediacy of everyday market noise. It even dwarfs the relatively long-term mindset we as portfolio managers have when evaluating the US economic cycle and its impact on our portfolios. We believe that investors who can maintain that very long-term mindset for their equity allocation can be — and many have been — well-served.


Are US value stocks poised for a Reagan-era resurgence?

How the election of a new president could have value investors thinking of 1981

Nick KalivasAfter some pre-election jitters, the US equity markets appear to have embraced the victory of President-elect Donald Trump and Republican control of Congress. Between the day prior to the vote (Nov. 7) and Nov. 22, value stocks outperformed both growth stocks and the broader market. This was evidenced by the Russell 1000 Value Index, which rallied 4.8%, while the Russell 1000 Growth Index gained 2.8% and the broader market S&P 500 Index was up 3.6%.1

Over the course of his administration, President-elect Trump is expected to propose supply-side tax cuts, loosen business and financial regulations and lay out a plan to increase infrastructure spending. I believe these policy proposals, if enacted by Congress, could be constructive to value stocks. Value stocks typically trade at a discount relative to their peers based on valuation metrics like earnings-to-price, book-to-price and sales-to-price.

Financial stocks, which are typically seen as a value play, have already benefited from expectations of fiscal stimulus spending and reduced regulation: The S&P 500 Financials Index rallied 11.5% post-election through Nov. 22 and was priced at 1.27 times book value, with a forward price-to-earnings (P/E) ratio of 14.94, as of Nov. 22. Prior to the election on Nov. 7, this same index had a forward P/E ratio of 13.11.1

Value investing: A Reagan-Trump analog?


Morningstar introduces new tool to help investors better understand alternatives

Explore what the tool does — and doesn’t — tell us about alts

Davis_Walter_sm_150dpi_RGBAs Invesco’s Alternatives Investment Strategist, one of my biggest areas of focus is educating people about alternatives. Based on my conversations with investors, its clear alternatives are an ongoing source of confusion for many. That’s why I was pleased to see that Morningstar has introduced a new alternatives tool1 to help investors better understand the correlation and risk characteristics of the alternatives they are considering. Given Morningstar’s broad reach,


OPEC production cut bodes well for oil prices, E&P firms

Compliance will be key if the agreement is to have a long-term impact on the industry

MacDonald_Norm_sm_150dpi_RGBOn Nov. 30, the Organization of Petroleum Exporting Countries (OPEC) reached an agreement to cut its crude oil output, marking the group’s first production cut in eight years. The details are still emerging, but key aspects1 include:


The US election: Real estate implications of a Trump victory

Considering the potential impact of five key policy proposals on the real estate industry

Max Swango

President-elect Donald Trump’s proposed policies represent a potentially sharp departure from the current policies of the Obama administration. As a result, investors are contemplating what the Trump presidency will mean for the direction of the US economy, as well as the subsequent implications for real estate markets.

While we are unlikely to gain clarity on the substance and priority of policies until Mr. Trump’s first 100 days in office, the checks and balances in the US legislative system — coupled with the slim Republican majority in the US Senate — make it unlikely that Trump would see all of his proposals passed into law in their current form.

With this in mind, we at Invesco Real Estate do not expect


US value stocks: Investing in an interconnected world

2017 Investment Outlook series

Kevin HoltWhile 2016 turned out to be a decent year for US equities, with the S&P 500 Index returning 5.87% as of Oct. 31, 2016,1 we witnessed historically high volatility that illustrates the interconnectedness of global markets.

• To start the year, we saw a market plunge in China so severe that it caused market circuit breakers to kick in for the first time.

• At mid-year, the UK’s “Brexit” decision to leave the European Union (EU) shocked the world.

• And at the end of the year, US voters concluded a controversial election season by choosing a Republican president and Republican Congress. While the process was tumultuous, this potentially has the ability to be a game changer in that market-friendly actions (less regulation, lower taxes and repatriation of US dollars held offshore) by the new administration are a real possibility.

Finding opportunity in energy and financials

From a sector perspective,