The Invesco Equity Strategy Playbook

Get our current views on equity portfolio positioning, supported by in-depth research

Acquiring and analyzing financial and economic data to develop a view on global equity markets can be a time-consuming and expensive endeavor that requires a specific, technical skill set. The Equity Strategy Playbook seeks to solve these issues by gathering, analyzing, and presenting the drivers of equity performance in emerging markets, China, Japan, Europe, and the United States in a visual and digestible format.

Where Are Equity Opportunities Located Today?

After tumbling well into correction territory late last year, global equities (as measured by the MSCI All Country World Index) have rebounded sharply in 2019.

While emerging markets (EM) have experienced a tepid six months owing to intensifying trade wars, our positive outlook should resume thanks to the US and Chinese authorities’ efforts to ease financial conditions. Despite recent underperformance, our EM equity thesis of attractive valuations plus strong economic growth hasn’t changed, and we still see opportunities for long-term investors.

In Japan and Europe, equity valuations were attractive, monetary policy was accommodative, and share prices were relatively oversold. However, we believe those markets face headwinds in the form of fiscal drag, sluggish economic growth, and negative currency trends.

US stocks (as measured by the S&P 500) have outperformed global equities (as measured by the MSCI All Country World Index) since the beginning of 2008, a prolonged period of outperformance that we expect to continue thanks to an aging—not ending—business cycle, and an economy that continues to grow at a solid pace.

How Is the Playbook Designed?

In our view, a balanced approach to formulating a successful equity strategy requires a careful and thorough assessment of an array of factors, presented below. The views presented in the Playbook follow a systematic framework that incorporates each of these important factors in a consistent manner.

Figure 1: A Consistent, Systematic Method

For Illustrative Purposes Only

We apply this framework to key global equity markets, offering insights that investors can leverage as they build and maintain an equity portfolio. Today, for example, our technical analysis underscores what may be a significant turnaround in emerging market stocks, which experienced heavy selling pressure relative to developed markets – a positive indicator from a contrarian perspective. Over the past 30 years, rebounds from oversold conditions have been followed by multi-year periods of EM outperformance. We believe this could be another one of those episodes.

Figure 2: A Generational Buying Opportunity for EM Stocks?

Emerging Market Equities Relative to Developed Market Equities Since 1988

Sources: Bloomberg L.P., Invesco, 4/30/19. Note: MSCI EM Index price returns in US dollars. An investment cannot be made directly into an index. Past performance does not guarantee future results.

Updated Views Every Six Months

For more details on these and other trends impacting global equity markets, please download the complete Equity Strategy Playbook or the Equity Strategy Playbook Cheat Sheet, and check back for our updated views.

All data from Bloomberg (as of 4/30/2019) unless otherwise noted.

Important information

Blog header image: Sergio Souza/unsplash.com

The MSCI Emerging Market Index is designed to measure the equity market performance of the emerging markets.

The MSCI World Index is designed to measure the equity market performance of developed markets and includes the US, Eurozone area, Japan and Canada.

The MSCI All-Country World Index is designed to measure the equity market performance of developed and emerging markets.

The risks of investing in securities of foreign issuers, including emerging market issuers, can include fluctuations in foreign currencies, political and economic instability, and foreign taxation issues.

The opinions referenced above are those of the author as of June 12, 2019. These comments should not be construed as recommendations, but as an illustration of broader themes. Forward-looking statements are not guarantees of future results. They involve risks, uncertainties and assumptions; there can be no assurance that actual results will not differ materially from expectations.

Talley Léger is a Senior Investment Strategist for the Global Thought Leadership team. In this role, he is responsible for formulating and communicating macro and investment insights, with a focus on equities. Mr. Léger is involved with macro research, cross-market strategy, and equity strategy.

Mr. Léger joined Invesco when the firm combined with OppenheimerFunds in 2019. At OppenheimerFunds, he was an equity strategist. Prior to Oppenheimer Funds, he was the founder of Macro Vision Research and held strategist roles at Barclays Capital, ISI, Merrill Lynch, RBC Capital Markets, and Brown Brothers Harriman. Mr. Léger has been in the industry since 2001.

He is the co-author of the revised second edition of the book, From Bear to Bull with ETFs. Mr. Léger has been a guest columnist for The Big Picture and for “Data Watch” on Bloomberg Brief, as well as a contributing author on Seeking Alpha (seekingalpha.com). He has been quoted in The Associated Press, Barron’s, Bloomberg, Business Week, Dow Jones Newswires, The Financial Times, MarketWatch, Morningstar magazine, The New York Times, and The Wall Street Journal. Mr. Léger has appeared on Bloomberg TV, Canada’s BNN Bloomberg, CNBC, Reuters TV, The Street, and Yahoo! Finance, and has spoken on Bloomberg Radio.

Mr. Léger earned an MS degree in financial economics and a Bachelor of Music from Boston University. He is a member of the Global Interdependence Center (GIC) and holds the Series 7 registration.

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