Invesco's "Applied philosophy – The land of the rising prices" delves into the prevailing inflationary trends in Eastern members of the European Union, drawing parallels to the post-communist era of the 1990s. The study examines two distinctive inflationary periods, comparing
The article "Uncommon truths" delves into the question: Why is gold so expensive? It scrutinizes the high prices of gold, nearing long-term historical peaks, propped up by U.S. crises, inflation, geopolitics, and the decline of cryptocurrencies. Despite the rise in
When central banks decide to tighten monetary policies, repercussions are felt across various business models, especially within the banking sector. The increased interest rates and higher financing costs pose a significant challenge, potentially causing disruptions and rendering certain business models
The first quarter of 2023 witnessed market recovery despite looming economic slowdown and issues within the banking sector. The text, "Strategic Sector Selector" by Invesco, highlights the lasting impact of the monetary tightening cycle on the global economy. It also
Last week brought good news on US inflation but the declines were even more dramatic in Europe. However, core inflation in the Eurozone has yet to peak. We believe it will follow headline inflation lower but the ECB may want
Global Asset Allocation for Q2 2023: Defensive Approach and Regional Bias toward Emerging Markets The economic cycle analysis suggests a contraction phase, leading to a more defensive approach with more cash and less risk. Within the Model Asset Allocation, the
Applied philosophy Are global equities in a recovery or still in the midst of a downturn? We analysed how valuations and earnings progressed through previous market cycles to get closer to an answer. While our findings provide some clues to
Economies appear to be more resilient than expected. A strong US payroll gain in January encouraged talk of a soft landing and provoked a reversal of the recent uptrend in assets. I believe this will prove to be a temporary
It’s been a good start to the year, with positive returns on most assets. Upcoming Fed decisions may determine the immediate path of yields. But bonds are back and we think fund flows may push …
Most assets struggled in 2022. Among alternatives, commodity related categories were at the top of asset rankings (again), while cryptocurrencies and private equity were at the bottom. We expect falling inflation to pave the way for better outcomes …
In the final quarter of 2022, global equities recovered some of the ground lost earlier in the year. Inflationary pressures eased somewhat, and the pace of monetary tightening slowed. The outlook for equity markets remains uncertain in the near term,
It is time to forget central scenarios and think about improbable but possible outcomes. Markets remain volatile, so our list of surprises errs to the positive (these hypothetical predictions are our views of what could happen even if they do
Russia’s invasion of Ukraine dominated our thoughts in 2022 but inflation and central banks seemed more important to markets. We expect central banks to dominate again in 2023. A year ago, we were expecting less economic growth and a convergence
We believe the US dollar is expensive and starting to run on empty. Looking ahead to when the dollar weakens, we expect it to provide a ceteris paribus boost to commodities, emerging market assets and …
Given our view that 2023 will be a year of transition from a contraction regime to one of recovery, we reduce the defensiveness of our Model Asset Allocation, while keeping some powder dry for when recovery is confirmed. We are
Unusually, inflation in the Eurozone is well above that of the US. We believe that two important factors, dollar and European gas price strength, are already fading. Hence, we think Eurozone inflation may have peaked and expect it to fall
While most investors are open to equity exposure in a low volatility market, they tend to shy away as volatility increases. To counteract equity volatility, asset managers have traditionally added perceived ‘safe haven’ assets like government bonds to the portfolio.
Financial markets rebounded strongly after October’s US consumer price print surprised to the downside. We would not put too much emphasis on one month’s data and would await confirmation before sounding the all-clear. Nevertheless, we think inflation will remain an
Extracting a common thread from last week’s abundant information flows was impossible. Perhaps the critical item will be the weakness of the US economy revealed by detailed GDP data. Last week was rich in information. From UK and Chinese politics,
In the third quarter of 2022, global equities resumed their slide with no end in sight after a brief period of hope during the summer. Waiting for a recovery at the moment feels like waiting for Godot. Global central banks
Emerging market equity returns have been resilient year-to-date in the face of increasing uncertainty over the global economy and rising interest rates. The region remains our preferred choice in our model asset allocation, especially if inflation peaks, which we expect
After a 24% year-to-date decline in the S&P 500, we ask what could make us turn positive on equities. A 30% further decline would help but short of that, some combination of the start of recession, VIX above 40 and
This is the second edition of our regular monitoring of the path to net-zero. We continue to focus on the C20 – the 20 largest CO2 emitter countries (see Figure 1). These countries accounted for 80% of global CO2 emissions in 2021 and 18
Emerging market equity returns have been resilient year-to-date in the face of increasing uncertainty over the global economy and rising interest rates. The region remains our preferred choice in our model asset allocation, especially if inflation peaks, which we expect
Yields have again risen on all assets but we think this is largely compensating for greater policy/recession risk (we think we are in the contraction phase of the cycle). We boost cash to further Overweight, while reducing equities to further
After falling 23.6%, the S&P 500 has bounced 13%. Does that mean the bear market is over? History, suggests not, especially given that the Fed may now tighten even more aggressively, which I think raises the risk of recession. Viewed
Inflation has been a major driver behind financial market returns and we expect that to remain the case in the short term. Trade costs are a significant contributor to the final price of any good with shipping costs its most
Much of the world continues to move past the COVID-19 pandemic, but its remarkable effects on economies and policies remain top of mind as a new set of uncertainties enters the picture. Historic pandemic-era moves by both fiscal and monetary
The slump in global equities deepened in the second quarter of 2022 as concerns about a recession replaced fears of high inflation and an escalation of the war in Ukraine seemed less likely. The US Federal Reserve has maintained its
Global debt ratios declined in 2021 on the back of the rebound in GDP. Falling bond yields dampened the rise in debt service ratios over recent years but that is now changing. We fear the corporate debt …
Most assets have again delivered negative returns in both local currency and USD, with the notable exception of commodities (or more precisely energy and agricultural products). That was unfortunate for us, given that we were zero-weighted in commodities (having been
Chinese equities have recently outperformed other regions (while bonds have done the reverse). We ask whether this is a dead-cat bounce or the start of a new trend. There are many worries about Chinese stocks but we suspect a lot
The COVID-19 pandemic increased the proportion that developed world consumers spend on goods versus services. This has been reflected in the outperformance of sectors focusing on the production and selling of goods. We think that consumer spending patterns will return
The year started with central banks turning hawkish, followed by Russia’s invasion of Ukraine, both of which destabilised financial markets. Many cyclical assets are now cheaper than when we last wrote and we are adding to equities within our Model
Recent conversations with investors reveal a lot of confusion about what causes inflation and what the future path will be. We take a look at various explanations including a Malthusian view of longterm drivers, shorter-term views of more proximate drivers
Global equities retreated in the first quarter of 2022 in the face of higher inflation and the war in Ukraine. The US Federal Reserve has become even more hawkish despite the increasing threat of a significant slowdown in economic growth.
The tragedy unfolding in the Ukraine has been the main focus for financial markets this week. The impact on global economic growth remains to be seen, but we believe that the US Federal Reserve will start tightening monetary policy by
We put some numbers on the effect of Russia’s invasion of Ukraine. We guess it could reduce global GDP by 0.5%-1.0% (while boosting inflation) but policy support may dampen that effect. What a tragedy for the people of Ukraine. They
Equity markets started 2022 like someone running to catch a train. Investor sentiment has since turned ever more hawkish on interest rates as inflation showed no signs of moderating. The technology sector has been caught at the sharp end of
Gold has done amazingly well, considering the rise in US treasury yields. Geopolitical tensions and fears of inflation may be helping. But we suspect that without US recession it has further …
The Fed has told us it will soon raise rates. History suggests equities and short duration bonds will outperform over the coming months. The late start to this tightening cycle may complicate matters. So now we know – the Fed has
Some alternative assets performed very well in 2021, especially private equity and Bitcoin. But we think 2022 will be very different with less growth but lots of policy tightening. Hence we expect a convergence of returns but still favour cyclical
Uncommon truths It is time to forget central scenarios and think about improbable but possible outcomes. Market sentiment is now mixed (thanks to the Fed), so our list of surprises contains something for everybody (these hypothetical predictions are our views
The Covid pandemic again dominated our thoughts in 2021. Nevertheless, cyclical assets did well (though our list of 10 surprises had mixed results). We are more cautious about 2022. A year ago, we were hopeful that vaccines would allow strong
The economic recovery has been thrown into jeopardy by the emergence of the new Omicron variant of Covid-19. However, we think that it is unlikely to completely derail the cycle and should allow central banks to tighten monetary policy in
Could a lack of upstream investment lead to a shortage of oil and higher prices? We think lower investment was due to falling prices and believe it is now reversing. We remain wary of oil.
Given our view that 2022 will be a year of transition and that asset class returns will converge, we adopt a more balanced approach within our Model Asset Allocation, though still maintain a preference for cyclical assets. We reduce the
We believe that Africa will be the economic and investment story of this century. However, it is a continent of 54 countries, each with its own potential, pitfalls and capacity to absorb different forms of investment. The aim of this document is
The sharp rise in inflation rates across many economies driven by supply chain issues and labour shortages has been a major concern for investors as economies opened up after pandemicrelated lockdowns. Among other effects, this may have an impact on
Uncommon truths: Rising bond yields have recently been associated with falling equity prices (reversing the trend of this century). We think this is a temporary reversal and do not fear higher yields, unless caused by costpush inflation (we would then
