Are emerging markets turning a corner?

A tough fourth quarter led to a solid January, and valuations remain compelling

Time to read: 2 min

The fourth quarter of 2018 was negative for both emerging and developed markets. However, we saw emerging market headwinds start to ease toward the end of the year, thanks to stabilizing currencies, lower oil prices, lower inflation pressures and progress in the US-China trade conflict. In fact, EM stocks rebounded strongly in January, yet valuations have remained at a discount to developed markets. All told, we believe there are compelling opportunities to be found in emerging markets.

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The deteriorating state of earnings in Asia

When will prices in China and Japan become attractive?

Time to read: 4 min

Slowing global trade has weighed down export-oriented markets in Asia, and the regional earnings outlook has been deteriorating rapidly. Over the past six months, earnings expectations have been revised down 4% for the MSCI All Country Asia Pacific Ex-Japan Index.1 For December, the earnings revision ratio (which compares positive versus negative revisions) fell to 0.39, the worst reading ever recorded outside of a recession.2 The downgrades were broad-based and included all Asian economies, with 13 of 16 sectors (as defined by Merrill Lynch) experiencing at least twice as many downgrades as upgrades.1 Despite this gloom and doom, some Asian companies are beginning to look attractive using our team’s Earnings, Quality and Valuation (EQV) criteria.

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European uncertainty has lowered the price tag for quality stocks

Fourth-quarter volatility expanded the opportunity set for those looking for a deal

Time to read: 3 min

The fourth quarter of 2018 was tough on investors in European equities, and uncertainty appears to be rising as we enter 2019. But, the Invesco International and Global Growth team believes that environments like these can result in great prices for attractive businesses. In fact, we haven’t seen valuations in Europe this low since 2013. So, what is our outlook for Europe, and where are we finding opportunity?

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Despite lower GDP growth, European earnings may accelerate in 2019

Brexit uncertainty has captured the headlines, but we are constructive on quality growth holdings

Time to read: 3 min

For months, Europe has grappled with geopolitical uncertainty in the form of ongoing Brexit negotiations (which face a looming March 2019 deadline) and Italy’s populist coalition government. In this environment, UK companies have appeared less likely to invest — which could lead to lower European growth levels next year.

So what do Brexit doubts mean for our team’s Earnings, Quality, Valuation (EQV) outlook for the UK and eurozone? Let’s begin by dispelling three myths about the area.

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Shining the EQV spotlight on China and Japan

Third quarter review uncovers significant hurdles for equities

Time to read: 4 min

During the third quarter, the People’s Bank of China (PBOC) remained in active easing mode and Japan’s Nikkei 225 Index reached a 27-year high. Supportive monetary policy and strong momentum can often be positive indicators for markets. However, in our analysis of recent events and likely catalysts for future direction, the Invesco International and Global Growth team continues to seek opportunities but believes both markets face obstacles that could impact future performance.

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