Global markets: Eight issues to watch this week

Weekly Market Compass: Key votes and critical data releases could influence the markets as January ends

Time to read: 5 min

Last week was momentous as experts in Davos warned about the dangers of debt, more signs of a European slowdown emerged, and the longest government shutdown in US history came to an end. In today’s blog, I discuss what we learned last week — and highlight eight things to watch during the final week of January.

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Markets grapple with government dysfunction

Weekly Market Compass: Geopolitics threaten to drag down economic growth

Time to read: 5 min

Last week saw government dysfunction on full display in several different countries. While politicians in the UK and US continued to make headlines, expectations for lower economic growth emerged in a report from the International Monetary Fund.

Will the UK crash out or stay in?

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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.

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What’s next for Brexit?

After the dramatic defeat of the UK Prime Minister’s EU withdrawal plan, we see five scenarios for the future EU-UK relationship.

Arnab DasTime to read: 6 min

Yesterday, Parliament rejected UK Prime Minister Theresa May’s Brexit Withdrawal Bill by a 230-vote margin — the largest defeat of legislation in nearly 250 years, when Parliamentary records began.1 That the defeat exceeded consensus by as much as 100 votes reflects the depth and breadth of dissatisfaction with May’s Brexit plan. Many Members of Parliament (MPs) fear it could further undermine the economy, contribute to secession in Northern Ireland or Scotland, or might not confer the freedom for which Brexiters campaigned in the referendum.

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Retail real estate faces a reckoning

Our focus is on higher-quality REITs that are evolving

Time to read: 5 min

Retail real estate is in the midst of a significant transitional phase due to the changes wrought by e-commerce. At Invesco Real Estate, we believe retail real estate investment trust (REIT) landlords should work to differentiate themselves from e-commerce by re-tenanting, undergoing redevelopment and creating mixed-use retail ecosystems. Through our team’s fundamental lens, we have observed a widening gap between higher-quality and lower-quality retail real estate. In this blog, we briefly explore one of the top retail real estate operators today, as the team believes that selectivity within the retail REIT sector is essential due to the deepening bifurcation between the haves and have-nots.

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Investor sentiment stays positive despite geopolitical drama

Weekly Market Compass: Investors seem to be tuning out everything except trade wars and Fed tightening

Time to read: 5 min

There has been no shortage of drama across the macroeconomic and geopolitical landscape so far in 2019. However, it appears that investors may be tuning out much of the political theater around them. Which storylines are moving markets now, and which may become more integral to the plot in the weeks ahead?

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Low Volatility is the equity factor winner for 2018

In the fourth quarter, Dividend Yield was also a strong competitor

Nick KalivasTime to read: 5 min

The fourth quarter of 2018 was exceedingly tough for US equities, with no gains to be found in any of the indexes tracked by our quarterly factor scorecard. And yet, certain factors — namely Low Volatility and Dividend Yield — were able to significantly cushion the blow suffered by the broad market. While the S&P 500 Index lost 13.52% in the quarter, the S&P 500 Low Volatility Index fell just 5.22%, and the S&P 500 Low Volatility High Dividend Index fell just 6.77%.

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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.

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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.

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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.

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