What a week — both the S&P 500 and NASDAQ Composite Indexes reached all-time highs last Thursday, but we also saw a reversal of the rotation from growth/defensives to cyclicals in both European and US markets. Markets are clearly reacting to the problems that many economies are facing as COVID-19 continues to impact growth. Recent data shows evidence of these problems. Europe may face a modest recession Europe is clearly at risk of a double-dip recession, albeit a modest one. The IHS Markit Flash Eurozone Composite PMI (Purchasing Managers Index) clocked in at 47.5, down from December’s 49 ..read more

Macro update The year 2020 will certainly go down in history as one of the most disruptive to societies around the world, with enduring social and economic consequences for years to come. 2020 will also be a record-breaking year in financial markets’ history, with stories and anecdotes to be told to future generations of investors. It was the year when oil prices traded to -38 US dollars per barrel,1 or when the worst global recession in history was accompanied by a market sell-off lasting only four weeks, just to name a few. Financial markets enter 2021 with strong positive momentum, on the b ..read more

A weak US dollar is commonly seen as a benefit to international stocks as foreign companies’ returns appear more attractive in dollar-denominated terms. So it’s no surprise that, as an equity strategist, I’m often asked about my outlook for the US dollar. After a dramatic “risk-on” rotation beginning in early 2020, we greet the new year with a technically oversold US currency and overbought stock market. In other words, investor positioning has become lopsided, arguing that a countertrend bounce in the “greenback” and near-term drawdowns in stocks may be in store. Looking further ahead, howeve ..read more

One of the things I love most about my job is the opportunity to talk with investment experts about their views of the world and the opportunities they see on the horizon — to ask them the candid questions that are on my mind and the minds of many of you as well. I don’t run into these folks in the office hallways anymore — but I find their insights to be more critical than ever. That’s why I’m excited to co-host Invesco’s new podcast, Greater Possibilities, which gives us a new forum to have these conversations — and gives you the opportunity to listen in. Along with my co-host, Invesco’s Pam ..read more

It might be 2021, but it doesn’t feel like a new year in many parts of the world. We haven’t yet turned the page on all the difficulties of the past year, so it seems like we are stuck in 2020. Or as my colleague aptly put it, this is just December 49th, 2020. Vaccinations moving slowly in many parts of the world Let’s start with COVID-19. Things aren’t getting better globally in terms of controlling the virus. The US and the UK look particularly challenged. And the holiday season could have been one giant superspreader event for those who did not stay isolated. Germany has had record daily CO ..read more

Macro update Financial markets roared back to life over December, boosted by news of potential breakthroughs on multiple COVID-19 vaccine trials. The confluence of Pfizer, Moderna, and AstraZeneca results increased investor confidence and expectations for a broad-based distribution of vaccines in the first half of 2021. Even discounting delays on the availability of the vaccine for the wider population, the immunization of healthcare workers, the elderly, and the more vulnerable parts of society should meaningfully alleviate the pressure on hospitals, and reduce the need for lockdown measures ..read more

Midstream equities performed admirably in December but underperformed the broader markets to close a volatile year highlighted by the impact of the COVID-19 global pandemic and a brief OPEC market share battle. Amidst the energy market volatility, natural gas liquids prices have recovered to two-year highs, which may bode well for throughput volumes for midstream sector participants focused on natural gas processing, fractionation, storage, and export. MLP market overview Midstream MLPs, as measured by the Alerian MLP Index (AMZ), ended December up 2.5% on a price basis and after distributions ..read more

The past week has been a momentous one, to say the least. It was filled with surprise, horror and disappointment — certainly in the US, but also for those watching around the world. I received a number of questions about how the stock market could be up in a week like this one. Let me try to explain: We have to recognize that the stock market has had an upward bias that was created long before the November election, driven by strong monetary policy accommodation from the Federal Reserve. Then we learned in the fourth quarter that multiple vaccines had been developed that were effective in prot ..read more

2020 was a crazy year for investors, and convertible securities had an especially wild ride. From the beginning of the sell-off  on Feb. 20 to their low point on March 23 of 2020, the ICE BofA US Convertibles Index had declined by roughly 26%.1 After that dramatic – and brief – sell-off, convertible returns rebounded sharply, and the index was actually up 15% by the end of April from the March low. 1 And performance has continued to improve since then – the ICE BofA US Convertibles Index climbed by more than 46% in 2020, from Jan. 1 through Dec. 31. That puts the asset class in rarified a ..read more

In this time of great political divide, the one thing on which there seems to be broad agreement is that divided government has generally worked better for financial markets than one-party control.  In the aftermath of the highly contested 2020 election, investors seemed to take solace in the belief that divided government would create the type of political gridlock that historically has tended to propel markets higher.  The fact that US equity markets advanced nearly 11% in November 2020 and ended the year at record highs1 seemed to affirm the value of political checks and balances ..read more