India’s economy: What does 2017 hold in store?

Driven by demonetization, India’s economic rejuvenation points toward a positive long-term outlook

Sambhshivan_Shekhar_sm_150dpi_RGBBy any measure, 2016 was a year of seismic economic change for India, particularly with the surprise “currency exchange program” in November, also referred to as demonetization. Three months after this unprecedented move, the overhang already seems to be behind us. Industrial production surged sharply by 5.6%, capital goods within manufacturing recorded 15% growth after several months of contraction, and electricity generation picked up to 8.9%.1 Overall car sales also reported an increase of 16% year-over-year.2 These positive macro points confirmed the view of the Equity Investment Team in Asia that the impact of demonetization would be transitory in nature.

Structural growth in India — especially domestic consumption — remains promising over the long term. Looking ahead, we expect

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China: Making solid progress on its Five-Year Plan

As the National People’s Congress convenes, we highlight three government priorities to watch

Mike_ShiaoThe annual National People’s Congress (NPC) started on March 5, 2017, with Premier Li Keqiang announcing key economic growth targets and major reform initiatives designed to help China achieve stable growth and become a “moderately prosperous” society by 2020. These announcements are in line with the vision that was laid down two years ago in China’s 13th Five-Year Plan.

China was largely on track with its policy targets in 2016. The economy grew 6.7% (as seen in the table below) while making progress in reducing industrial overcapacity and financial risks. 2017’s key economic targets are designed to build on that progress, with further fine-tuning in growth rates widely expected, to allow room for the Chinese government to proceed with reform issues such as overcapacity and leverage.

The table below compares the key targets announced this year and last year:

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From promises to policy: What’s in store for US stocks?

Trade agreements and tax reform could impact corporate earnings

Ryan AmermanAs of today, we have more questions than answers about what to expect from the new Donald Trump administration. Certainly, it appears the US president has a pro-business and anti-regulation outlook, but how exactly will this translate into policy, and how will corporations and trading partners react? That remains to be seen.

Three questions to watch

Less regulation would be positive for economic growth and investment, in the view of the Invesco International and Global Growth team. For example, tax reform — both on a personal and business level — could lead to increased discretionary cash flow and demand for domestic investments, which from a longer-term perspective could be positive for capital spending in the United States. Already, small-business confidence hit a 12-year high and chief executive officer confidence hit a 10-year high after the election.1

There are several questions, however, that bear watching:

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Asian contrast: Japan falters as China transitions economy

Trump administration policies could potentially rattle economies of both countries

Jason_Mark_sm_150dpi_RGBAbsent the major reform investors have been hoping for, Japan’s economy remains largely stagnant, with the yen weakening over the last quarter of 2016. By contrast, China, along with the rest of Asia, seems poised for another year of relatively stable growth. The policies of US President Donald Trump, however, could potentially spur volatility in both economies. Let’s take a closer look.

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Trade secret: Emerging markets constrained by US policy uncertainty

Except for trade concerns, emerging market economies are generally on a positive trajectory

Cao_Steve_sm_150dpi_RGBUncertainty about US trade policy changes that could potentially harm emerging market economies dragged them down 4% during the fourth quarter of 2016, underperforming developed markets by 2%.1 Yet emerging market economies generally showed positive signs, with exports beginning to recover, commodity prices rebounding, and inflation remaining benign.

Country snapshots

Here’s a quick look at how individual countries fared:

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Buckle up and look for opportunity in Europe

Despite improved growth, political uncertainty may give investors a bumpy ride in 2017

Dennis_Matt_sm_150dpi_RGBA brimming political calendar will make 2017 an eventful year for Europe. While a bumpy ride seems all but certain, it could mean increased opportunity for investors, given the heavy political slate and investor skepticism.

Brexit and beyond

Brexit, of course, is on the world’s radar. On the heels of the UK’s 2016 referendum, Prime Minister Theresa May has pledged to trigger Article 50 of the Lisbon Treaty by March. That would begin the two-year window for the UK to extricate itself from the European Union (EU). Even with the exit details not yet worked out, the significant reaction to the vote

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