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Market outlook

September 2017


  • The US equity market gained in June despite a rise in volatility as investors assessed the impact of the US Federal Reserve (Fed) raising interest rates. 
  • The weakness in inflation has added to signs that the US economic growth rate may be slower than forecast.

Europe (including UK)

  • European equity markets retreated in June. The European Central Bank (ECB) dropped its guidance that interest rates might fall further, saying that it now expects borrowing costs to stay at present levels for an extended period.
  • The ECB raised its euro-area growth outlook, but cautioned about inflation remaining subdued.

Asia Pacific (ex Hong Kong ex China ex Japan)

  • Asian equity markets continued to rally in June, with Taiwan, South Korea, India and Indonesia all hitting new record highs.
  • Although the structural transition to less dependence on global growth is progressing, most Asian economies remain dependent on global growth.

Hong Kong and Mainland China (H-shares)

  • Hong Kong shares rose, China (H-shares) edged lower in June. At month end, China realized another milestone as MSCI decided to include A-shares in its global indices.
  • In China, the growth conditions have improved, there are still a number of external and domestic challenges that may weigh on growth going forward.


  • Japan’s equity market ended the month higher, with solid earnings expectations providing support.
  • Companies are still focusing on cleaning up their balance sheets, where progress continues to be gradual. The loose monetary policy environment in Japan is likely to continue,  but the yen’s depreciation will likely be limited by overseas development.

Fixed Income​​​​​​​

  • The main story for bond markets this month was a shift in tone from the world’s major central banks. The ECB and the Bank of England both spoke about reducing the amount of economic stimulus they are providing.
  • Global government bonds are likely to face some headwinds from the potential for an increase in fiscal spending, a continuation of the cyclical recovery and potential for inflation to re-surface as a result of more aggressive stimulus policies.

Emerging Markets​​​​​​​

  • Emerging equity markets extended their winning ways by advancing higher in June, edging past developed markets for the sixth month in a row.  Emerging Asia was the strongest- performing region.
  • The Europe, Middle East and Africa region offers a wide range of diversified companies with strong management teams operating in areas of growth.

UK general election: Ruling party dismay at loss of majority

Economic insights

Economic insights

On Friday night (9 June 2017), British election delivered a blow to the ruling Conservative party, who lost their Parliamentary majority. The final outcome will likely leave the Conservative party with 319 seats compared with the Labour Party’s 261 seats, resulting in a hung Parliament (326 seats is the minimum requirement for a majority in the 650-seat Parliament). This is all against the background of the upcoming Brexit negotiations scheduled to begin on June 19.

British Prime Minister, Theresa May called for a General Election six weeks ago to increase the Conservative Party’s Parliamentary majority from the 331 seats they held prior to yesterday’s election. In addition, it was widely believed that the leader of the Labour party, Jeremy Corbyn was unelectable, given how far left his political policies were. However, as the election neared Corbyn proved to be surprisingly effective and his policies became increasingly popular.

Asian Insights Q1 - 2017

Asian equities: profitability, policy and reflation myth

Asian equities: profitability, policy and reflation myth

2017 so far has seen equity markets in Asia off to a positive start, and as a result, global investors are gaining more confidence in their outlooks. Along with global markets, Asian equities have moved forward in parallel led by economic sensitive sectors, while dragged by defensive sectors.

As the year progresses, we believe three key areas may have an impact on Asian equity markets: an improvement in profitability for Asian corporations, spurred by growth in certain sectors; global policy uncertainties impact to Asia will not be as significant and has been exaggerated by the market; and the myth of reflation, at least for the case of Asia.

Fed hikes short term rates for third time in 15 months

Fed’s constructive growth and inflation outlook likely paves the way for further hikes

The US Federal Reserve (the Fed) hiked its benchmark short-term interest rate by 25 basis points today, as expected. The statement was generally neutral, in our view, with upbeat commentary around the current growth backdrop. Inflation commentary was more mixed, stating that headline inflation has moved closer to the Fed’s target, yet emphasizing that core inflation continues to run below the Fed‘s target. Overall, the statement was similar to the January‒February statement, meaning that little has changed to alter the Fed’s view since then.
The Fed also released its widely anticipated Summary of Economic Projections (SEP), which includes the forecast of the federal funds rate or the so-called “dots.” The projected year-end 2017 federal funds rate indicates three rate hikes, unchanged from December’s SEP release, while the bond market had only been pricing in two prior to today’s announcement.1 The longer-run federal funds rate was unchanged at 3.0%. Growth and inflation projections were largely unchanged with only a slight upward revision to 2017 core inflation, from 1.8% to 1.9%.2
In her press conference, Fed Chair Janet Yellen stated that an unchanged SEP is consistent with gradual rate increases over time. The Fed is discussing and monitoring fiscal policy changes but has not yet included potential impacts in its projections. Therefore, federal funds rate projections were left unchanged.

Looking ahead
Given our constructive outlook for global growth, our base case view has been that the Fed will likely hike rates three times in 2017. We expect the bond market to continue to converge toward this view. We believe that risk assets will continue to be supported by a better global growth picture. If the market abruptly begins to price in more than three Fed hikes (four or more) or it believes that the Fed is behind the curve (meaning that it believes the pace of rate hikes is too slow), we would look to scale back this view, as this concern could lead to a risk-off environment.

1 Source: Bloomberg L.P., March 15, 2017.
2 Source:, March 15, 2017.


2017 Investment Outlook

After the challenges of the past year, our investors provide insights into what lies ahead.

After the challenges of the past year, our investors provide insights into what lies ahead.

This past year has been marked by a series of macro events that helped shape a dynamic, challenging market environment. The UK’s vote to withdraw from the European Union, oil price volatility, a contentious presidential election in the US and slowing growth in China all contributed to major market moves. With this as prelude, the year ahead promises to be interesting and challenging as well.

At Invesco, we’re dedicated to delivering an investment experience that helps people get more out of life. In fact, our entire firm has been built over many years with a single focus: to help clients achieve their investment objectives.

With more than 6,500 employees and an on-the-ground presence in more than 25 countries, Invesco is well-positioned to meet the needs of investors across the globe. We provide a comprehensive range of investment capabilities and outcomes, delivered through a diverse set of investment vehicles, to help clients achieve their investment objectives.

Our experienced investment teams are located in key cities all over the world, which we believe is a real strength of our firm. Maintaining investment teams in major markets enables us to stay on top of developments that impact the markets and companies in which they invest.

An important part of achieving your investment objectives may be keeping ahead of the dynamics that drive movements in the global markets. Working with our investment teams, we’ve developed this 2017 outlook to provide insights that could help you plan for the future or make decisions about your investments.

We hope you find this information helpful, and remain focused as always on helping clients meet their investment objectives ... wherever the markets take us.


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