A high-conviction, bottom-up approach to finding sustainable profit margins
As dividend value investors, my team is focused on sustainability of profit margins over a full profit cycle. I believe that we are in the later stages of the profit cycle, with corporate profit margins at about 1%1 below their peak levels in late 2014. What does that mean for us as high-conviction, bottom-up investors?Continue
Driven by demonetization, India’s economic rejuvenation points toward a positive long-term outlook
By 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 expectContinue
As the National People’s Congress convenes, we highlight three government priorities to watch
The 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:Continue
Trade agreements and tax reform could impact corporate earnings
As 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:Continue
Trump administration policies could potentially rattle economies of both countries
Absent 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.Continue
Except for trade concerns, emerging market economies are generally on a positive trajectory
Uncertainty 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.
Here’s a quick look at how individual countries fared:Continue