Currency outlook: Global central banks begin to normalize policies

Invesco Fixed Income shares its views of currencies around the world

US dollar:

Our strong global growth view indicates a mixed environment for the US dollar. We expect the US Federal Reserve to hike interest rates two more times in 2017. However, we believe other major central banks have more significant moves to make in terms of normalizing their policies. Global policy normalization should favor currencies of countries whose central banks are scaling back their quantitative easing (QE) programs — for example, the euro versus the US dollar.

Euro:

We continue to be

Continue

Interest rate outlook: Eurozone economy now in “Goldilocks” phase

Invesco Fixed Income shares its views of rates around the world

Europe:

The risks around the French elections are now behind us, and we are unlikely to face a far right insurgency in the next electoral test: Germany. In the background, European data continue to be solid and resilient to political risks. Given the French election’s market-friendly outcome, we expect a renewed focus on fundamentals and European Central Bank (ECB) watching going forward. As post-election short covering winds down, we expect European core yields to resume their upward trend and peripheral spreads versus German bunds to widen again. The periphery could come under more pressure in the unlikely event that early elections are held in Italy.

US:

Stronger global growth is likely to be

Continue

Weekly Market Review: What to look for in Trump’s budget, and beyond

We analyze five key items from last week, and preview two upcoming reports to watch

Investors have no shortage of headlines to absorb as we approach the summer months. Below, I highlight five key takeaways from last week — featuring a new federal budget proposal — and preview two questions that will be answered this week concerning jobs and productivity.

Continue

Private equity: What investors need to know

You won’t find these funds in your 401(k), but some in the industry want to change that. Find out why.

While private equity funds are currently off limits to retail investors, many large firms in the industry are seeking ways to include private equity exposure in 401(k) accounts and target date funds.1 Providing retail investors with private equity fund options would be a welcome development, in my view, potentially enhancing their ability to build effective portfolios for more secure retirements.

Institutional and high net worth investors have long been attracted to private equity for its potential to deliver returns above those of public equity markets. To understand why, let’s take a closer look at this asset class.

What is private equity?

Continue

Weekly Market Review: Can spending help support stocks?

As stocks swoon on political news, we examine the ability of businesses and consumers to prop up the market

After weeks of being impervious to negative headlines, the stock market experienced some volatility last week with the announcement that a special prosecutor has been appointed to investigate Russia’s involvement in the 2016 US presidential election. This has many implications. The outlier theory is that legislation such as tax reform will be taken over by the House and sped through Congress more quickly given that the White House will be preoccupied with the investigation. However, I would argue that this scenario is unlikely, and that the base case scenario is that the White House’s legislative agenda is pushed back in terms of timing and, possibly, pared back in terms of breadth. I would also argue that

Continue

Opportunities emerge as the ‘Trump trade’ unwinds

As the future of new policies becomes murky, investors seek opportunities that are grounded in today’s realities

The “Trump trade” has officially unwound in the global currency markets, reflecting investors’ fading confidence in Washington’s ability to pass growth-inducing legislation. After experiencing a post-election boost on the back of President Donald Trump’s victory late last year, the US dollar erased almost all of its gains as of May 17.1

While this week’s drop triggered dramatic headlines, my team believes that falling enthusiasm is creating an attractive entry point for investment opportunities based on real trends that we’re seeing today — not on inflated hopes for new policies.

The potential effects of a weaker dollar

Continue

What lessons can investors learn from surfers?

As markets ebb and flow, patience and the right tools can help you ride the waves

Jack TierneyFifty years ago, thanks to the lyrics and harmonies of a certain California surf rock band, I became entranced with the idea of catching waves, which to a Midwestern kid like me, sounded like the endless summer dream. To catch a wave, surfers paddle out to a certain point in the water and wait patiently for just the right moment to catch a ride. Some waves die out early, some are steady, and every now and then you catch a really great one that makes up for all the others. However, one thing is obvious — you have to be in the water to take advantage of the opportunities.

Catching the market’s waves

If you’ve ever seen a chart of a full market cycle, it looks very much like a wave

Continue

Weekly Market Review: Are investors becoming numb to risk?

A low ‘fear gauge’ might not be a bad thing — as long as investors don’t ignore fundamentals

Stocks barely hiccupped last week despite the onslaught of geopolitical headlines. But the big news was that volatility hit a historic low of 9.77 — its lowest level in more than 20 years — last week.1 Clearly, the world has not become less volatile, so what could this indicate?

Continue

Asian markets: Carrying some positive momentum into 2017

Is this the beginning of a long-awaited up cycle?

Last November, the Invesco International and Global Growth team reported that in Asia ex-Japan, the building blocks were in place to shore up top-line growth. Our outlook for Earnings, Quality and Valuation (EQV) was cautiously positive. 2016 marked the first time in five years where earnings forecasts did not collapse at year-end, and an upward bias to earnings forecasts has continued into 2017. Is this the beginning of a new earnings growth cycle?

For years, slowing top-line growth in Asia, combined with an inability to raise prices, had driven consistently negative earnings revisions. So far, 2017 is proving to be different. Earnings forecasts are being revised

Continue

Currency outlook: European economic activity continues to improve

Invesco Fixed Income shares its views of currencies around the world

Euro:

Our outlook for the euro remains constructive over the medium term. European economic activity continues to improve and should eventually allow the European Central Bank to pivot on quantitative easing (QE) and embark on tapering. We expect the euro to appreciate in this environment and this may unfold in Q2/Q3 this year. In general, we believe QE has approached its conclusion and policy adjustments going forward are likely to be skewed toward supporting longer-term euro strength.

Renminbi:

We expect the Chinese currency (onshore and offshore) to trade on the

Continue