US housing market slows, but risks to broader economy seem limited

Reduced affordability and moderating economic growth are key

Time to read: 4 min

The US housing market’s recovery since the global financial crisis is finally showing signs of deceleration. House price appreciation, which has outpaced income growth for several years, has slowed over the last several months and the recent pace of sales in the new and existing markets has failed to keep up with 2017 levels. We believe housing market conditions have downshifted, and factors related to affordability, supply, and the economy may steer housing fundamentals this year. While we see challenges to any reacceleration in housing market activity, we nevertheless believe we are entering a period of housing market moderation that is unlikely to drag significantly on the broader economy.

Continue

The investment implications of 5G network deployment

We believe three technology, media and telecommunications segments will benefit in the near-term

Time to read: 3 min

The highly anticipated “5G,” or fifth generation, network technology is designed for faster internet download speeds and an overall improved network experience for global consumers. In recent months, there have been a series of announcements regarding its release. We believe understanding the process of 5G network deployment could provide investors with interesting investment opportunities, particularly in a few key segments of the technology, media and telecommunications (TMT) sector that we expect to benefit from the rollout.

Continue

Do convertible securities have a role to play in 2019?

Our team believes the answer is yes. Here’s why.

Time to read: 4 min

Last week, a well-known, large US-based asset management firm decided to close its convertible securities fund, citing the fund’s inability to “gain broad acceptance” among some investors and, as part of a review of its products and offerings, “eliminating funds that lack a distinct role.” Following this announcement, the Invesco Convertible Securities Team has fielded several questions about our view of convertible securities. We continue to believe that convertible market remains healthy and that converts may offer investors a way to participate in the upside of the issuer’s stock while providing the potential downside risk mitigation of a fixed income instrument through regular coupons, a stated par value and maturity date.

Continue

Strong employment data may support Fed flexibility

Invesco Fixed Income expects slightly easier financial conditions in the first half of 2019, which will likely support risk assets

Time to read: 3 min

Expectations about the path of US growth have declined steadily over the past few months. Consensus forecasts have gone from very strong growth, to serious doubts over where growth is headed, to recession fears. On the other hand, the Federal Reserve (Fed) has been unwavering in its views and rhetoric about policy normalization, creating a toxic combination for markets. At Invesco Fixed Income, our own expectations of stable-to-weak growth and tightening financial conditions had led us to a short credit, long duration view late last year.

Continue

Does your bond portfolio contain a hidden risk?

If you’ve shortened your bond duration due to rising rates, we believe you may be more vulnerable to market volatility. Here’s a way to address both issues.

Time to read: 3 min

In its last meeting of 2018, the Federal Reserve said it would raise short-term interest rates by 0.25%. While the central bank indicated that it could ease up on rate increases in 2019 due to weakening in the economy, we could see further emphasis on rate increases this year if the data starts to signify a strengthening economy.

When interest rates are rising, many investors shun longer-duration bonds in order to lessen the risk of their bonds falling in value due to rate hikes. However, certain longer-duration bonds may offer a measure of stability during times of market volatility.  So how can investors prepare their portfolios for both rising rates and volatility? We believe one approach is to pair short-duration bonds with low volatility stocks.

Continue

Fed raises rates and sticks with its solid economic outlook

Statement indicates normalization will continue

Time to read: 3 min

The US Federal Reserve (Fed) hiked interest rates by 25 basis points to a target range of 2.25% to 2.50% on Wednesday, Dec. 19, signaling it believes continued policy normalization is necessary despite a recent tightening in financial conditions (i.e. lending conditions). Below is our take on the Fed’s statement, its economic projections and Chairman Jerome Powell’s press conference.

Continue