Global fixed income: What market threats lie ahead?

We assess ‘the good, the bad and the ugly’ trends we see across the globe

Arnab DasThe world economy and financial markets have been buffeted over the past year by national and geopolitical shocks, yet the current synchronized upswing across the world’s largest economies — the first since the global financial crisis (GFC) — remains unscathed so far. Growth is up but inflation is low, and major central banks remain accommodative amid monetary policy normalization in the US. Asset price valuations are stretched, yet yield hunger — if not outright yield starvation — persists.

In the view of Invesco Fixed Income, three key themes have emerged across geopolitics, national economic policies and the financial markets. We call them the “the good, the bad and the ugly.”

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Despite little help from Washington, a positive outlook for US credit

Fundamentals and global demand are providing support for the asset class

The financial markets started the year enthusiastically after the US presidential election, but momentum appears to have peaked as reality has set in. As political debates play out in the second half, Invesco Fixed Income expects credit markets to remain well-supported by foreign demand as global central bank policies have produced meaningful interest rate differentials, despite growing hedging costs. In addition, debt issuance will likely be contained, in our view, as debt-funded merger activity is anticipated to decline with the return of global growth impulses. Our active research process leads us to varying views on key sectors, which we will highlight in this outlook.

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Why invest in alternatives?

Part 2 of our “summer school” series on alternatives

As highlighted in my previous blog, What are alternative investments, I’m embracing the spirit of summer school with a series of four blogs reviewing the basics of alternative investments. Part 1 explained what alternative investments are. In this installment, I explore why an investor should consider investing in alternatives.

Why use alternatives?

Like stocks and bonds, alternative investments are simply tools used by investors in an effort to achieve their investment goals. Given their unique characteristics, alternative investments have the potential to help investors meet three key objectives:

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Equity outlook: Smooth sailing or a roller coaster ride?

Three reasons equity market volatility could tick upward sooner rather than later

Nick KalivasStocks are on a remarkable run, which has kept equity market volatility largely contained thus far in 2017. In fact, volatility, as measured by the CBOE Volatility Index (VIX), is currently at 8.84 — its lowest level since the index was first published in 1993.1 Moreover, the calendar-year high/low range for VIX is the narrowest since 1995.1

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Weekly Market Review: A sea of black swans

How today’s tensions are resolved could determine direction of capital markets

One of the key themes that I anticipated would affect markets this year is disruption. I have maintained that disruption would likely come in different forms: geopolitical risk and monetary policy risk. (There is one additional form — disruption caused by innovation — that will be addressed more fully in a future commentary.) At the risk of sounding like a broken record, I must underscore the concerns I have articulated time and again about geopolitical risk. In many ways, these risks can be viewed as black swan events — difficult to predict, but with far-reaching potential consequences.

North Korean standoff rattles capital markets

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The US debt ceiling saga returns

US short-term bond markets could be choppy as Congress seeks to resolve the looming issue

Once again, the US debt ceiling is in focus. Since March, the US Treasury has been employing “extraordinary measures” to fund the US government, such as halting contributions to certain government pension funds and borrowing money set aside to manage exchange rate fluctuations. But those measures are expected to run out this fall.

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Mid-point review: Are there still opportunities for growth in Asia?

After a strong first half, we assess earnings, quality and valuation characteristics for the region

The first half of the year saw strong performances across Asia. The MSCI Asia ex-Japan Index gained 18% (the fifth-highest first-half performance in the index’s 30-year lifespan), and Japan grew 14%, as measured by the MSCI All Country World Index ex-US Growth benchmark.1 What does such strong absolute performance mean for our team’s regional outlook? Below, the Invesco International and Global Growth team assesses the Asian landscape through our earnings, quality and valuation (EQV) lens, which we believe can reward investors over the long term.

Asia ex-Japan: Still room for opportunity

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What are alternative investments?

Part 1 of our “summer school” series on alternatives

Most will agree that one of the least enjoyable summer traditions is summer school. I got a vivid reminder of this the other day when I put my youngest son on the bus for his summer classes, then had flashbacks to my own summer before 9th grade when I did the same thing. But while summer school is not particularly fun (at any age), it can be extremely valuable.

In my experience, summer school gave me a preview of material I needed to know for the upcoming year and allowed me to catch up on any previously covered material that was difficult to master. Regardless of the reason for our summer “sentence,” we all emerged from summer school smarter and better prepared for the upcoming year.

With this in mind, I thought I would use this summer to write a series of blogs covering the basics of alternative investments. My hope is the series will provide an opportunity for people to become more familiar and comfortable with this topic and be more informed investors as we head into the second half of 2017.

What are alternative investments?

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What’s in your index?

Smart beta strategies have the potential to help mitigate sector risk

Nick KalivasMany investors are attracted to market-cap-weighted benchmark-index-based exchange-traded funds (ETFs), with the objective of obtaining stock market exposure at a low cost.1 As proof, investors have poured $70.8 billion into four broad-market-index-based ETFs over the past the year-and-a-half through June 2017.2 In their quest for low-cost equity exposure, however, investors may be overlooking some of the inherent features of market-cap investing that can lead to overweighting a sector when it falls out of favor. The bursting of the technology bubble in 2000, the financial crisis of 2008 and the oil crash of 2014–2015 provide prime examples.

Sector bets and the effects of market-cap investing

When choosing a strategy

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Weekly Market Review: Between a rock and a hard place in the UK

With Brexit looming, the UK’s quandary could be a cautionary tale for the US

Last week, the Bank of England (BOE) opted to keep its key short-term bank lending rate unchanged at 0.25% by a vote of 6–2. The BOE’s Monetary Policy Committee is keeping interest rates ultra low because of concerns that the United Kingdom (UK) economy is too weak to accommodate higher borrowing costs. It may seem surprising that

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