Governments could turn to fiscal stimulus rather than relying on central bank monetary policy
When contemplating the investment implications of Brexit, it’s worth considering the probability that it proves to be more significant than just the latest reason to become further concerned about the investment outlook. Clearly, this is the short-term perspective. In the longer term, however, it’s possible that Brexit could be seen as an inflection point in terms of policy strategy to address global economic travails. Specifically, fears of further populist rebellion could potentially lead governments to growth-enhancing fiscal policy instead of leaving the burden to central bank monetary policy, where the risk/reward arithmetic of zero and negative interest rate policies looks increasingly tenuous.
Dangerous political cocktailContinue
Analyzing the successes and challenges of ‘DC schemes’
The US defined contribution (DC) system is large by global standards, but most of us in the industry know that much improvement is needed. The good news is that there are other DC systems in the world that make good case studies on a variety of issues.
The surprising Brexit outcome may have overshadowed the business landscape for now, but plan sponsors and regulators in the UK have taken some noteworthy steps to help drive better outcomes for participants that should help the long-term financial health of the nation, in my view. The following information provides an overview of the positive aspects, and shortcomings, of the UK’s DC system in addition to highlighting ways to potentially help plans in the US.Continue
The managers of Invesco International Companies Fund vote ‘yes’
In the lead-up to the referendum on the UK’s continued membership in the European Union (EU), certain British bookmakers were offering strong odds on bets the UK would opt to exit, anticipating an approximate 25% probability of a leave win.1 At the same time, both sides were running neck-and-neck in the polls,1 rationally implying around a 50% chance of a leave vote result. This is an obvious example of a mispriced bet.
Investing is a much different endeavor,Continue
Central banks should focus on heightened purchasing power to be successful
The Bank of Japan (BoJ) and the European Central Bank (ECB) have been less successful than the US Federal Reserve (Fed) and the Bank of England (BoE) in conducting quantitative easing (QE) — that is, buying financial assets in order to spur economic growth. I believe part of the reason is that the BoJ and ECB have been less focused on expanding purchasing power and more concentrated on lowering interest rates — even into negative levels.
Comparing successful and unsuccessful QE programs
In examining the QE deployed by major developed economies — the US, the eurozone, Japan and the UK — there are clear differences in the types of methods used. The QE operations conducted by the Fed and the BoE have largely been successful for three reasons:Continue
With ongoing mentions of negative interest rate policy (NIRP) in the media, we’ve received questions about how these policies may affect the investments in Invesco International Companies Fund. Here is a brief look at our view and positioning around NIRP and our investments in Europe.