Politicization: A growing threat to central banks

Weekly Market Compass: Instead of attacking central banks, some politicians want to use them as a policy tool

Time to read: 6 min

The United States has always had a difficult, complicated relationship with the concept of central banks. Early on, critics sought to prevent the establishment of a US central bank, while today, politicians in the US and around the world seek to use central banks as tools to further their policy aims. In my view, central bank independence is critical to their ability to counteract the economic effects of geopolitical chaos.

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Should high yield investors be concerned about ‘fallen angels’?

The BBB bond market is growing, but we believe that worries about significant downgrades are overblown

Time to read: 5 min

Earlier this year, our investment grade colleagues discussed the potential implications of the growing BBB segment of the US investment grade market (US investment grade credit: A buy or a bubble?). In high yield, we have also received questions regarding the growth of BBBs. In this blog, we address some important questions: Are we likely to see significant downgrades among these bonds into high yield territory (BB and below)? Would the high yield market be able to absorb these “fallen angels” and what would be the overall impact on high yield? 

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After the expansion: Are you ready for what might come next?

Diversification has been in hibernation during this bull market, but it may be coming out of its slumber

Time to read: 3 min

Assuming we don’t fall into recession during the next four months, July 2019 will mark a new record for the longest US economic expansion since the National Bureau of Economic Research started tracking economic cycles way back in the 1850s.  Throughout this expansion, holding assets other than stocks has come at a steeper cost in terms of underperformance. But while investors may be feeling frustrated by the results of their diversification strategies, I believe it’s important to examine what can happen in the years following an expansion. History tells us that this is when the benefits of diversification have been most apparent.

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Change is in the air as the Fed, BOC and ECB pivot on policy

Weekly Market Compass: Can central banks’ policy shift offset the economic slowdown?

Time to read: 4 min

There is an old Chinese proverb that states, “When the winds of change blow, some people build walls and others build windmills.” In other words, some people embrace change while others fear it. I’ve come to the conclusion that the speed of the change has much to do with how a change is received. Just look at the past week, when we saw abrupt changes in the direction of the wind for central banks, followed by largely negative reactions.

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US job growth disappoints for February, but long-term trends are still strong

Invesco Fixed Income doesn’t expect this reading to disrupt the Fed’s policy in the near term

Time to read: 2 min

US nonfarm payrolls increased by a disappointing 20,0001 jobs in February — markets had expected an increase of 180,000.2 Contributing to the disappointment was the performance of key sectors such as construction, leisure and hospitality, education and health services. We at Invesco Fixed Income do not put too much weight on a single payroll print (as emphasized in our January blog: Strong employment data may support Fed flexibility). Our research has shown that the longer-term employment trend has been a better predictor of economic growth.

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US dollar may weaken due to renewed global growth convergence

Invesco Fixed Income shares its views on currencies around the world

Time to read: 2 min

US dollar: Underweight.

We continue to expect the US dollar to weaken against a backdrop of renewed global growth convergence. This will likely be driven by the unwind of the US exceptionalism theme of 2018 and the pivot toward a more dovish Federal Reserve policy going forward. Additionally, US budget and current account deficit concerns will likely persist and could be negative for US dollar performance.

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Interest rate outlook: Fed likely to extend its pause beyond market expectations

Invesco Fixed Income shares its views on rates around the world

Rob WaldnerTime to read: 2 min

US: Underweight.

Global interest rates are close to their recent lows, despite our view that growth risks are fading. In addition, it appears likely that the Federal Reserve will extend its pause longer than the market anticipates, and there is a chance of a pivot to a new policy framework (as discussed in our blog: Five things we think could go right for global markets in 2019). Both factors argue for higher bond yields and steeper yield curves going forward.

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Spring training for alternatives investors

Getting back to basics with alternative investments

Time to read: 3 min

As a big baseball fan and the father of a college baseball player, this is a joyous time of the year for me — it signals the return of baseball with the start of spring training. A primary goal of spring training is getting the players back to basics by focusing on the fundamentals of the game. By doing so, the players ensure they are ready to go when the season begins. In honor of spring training, I’d like to take investors back to the basics and fundamentals of alternative investments (or alts).

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Five things we think could go right for global markets in 2019

From the Fed, to Brexit, to China, we see positive signs that could support risk assets

Rob WaldnerTime to read: 5 min

At Invesco Fixed Income, we often talk about the risks that are likely to upset global markets. In this blog, we highlight the five things we think could go right and support markets in 2019. First, the US Federal Reserve (Fed) has told markets it is willing to be “patient,” and there is the possibility this patience could last a while. Second, US-China trade tensions have calmed somewhat, as the two countries appear motivated to reach agreement on key issues. Third, China is stimulating its economy, which we believe will support growth. Fourth, Brexit is softening, with the tail risk of a hard or no-deal Brexit diminishing in recent weeks. Finally, we see no signs of an impending US recession, despite fears that disrupted markets at the end of 2018. Each of these five possibilities would likely be supportive of risk assets, in our view.

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What trade-offs will the US accept for a trade deal with China?

Weekly Market Compass: Assessing the state of trade, and six events to watch this week

Time to read: 4 min

Two key risks — trade and central bank normalization — have had an outsized impact on global stocks for more than a year (sometimes positive and sometimes negative). This past week saw developments in each of these key issues.

How close are we to a trade deal?

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