Invesco Fixed Income Provides 2015 Outlook

- Global growth potential will be challenged by demographic headwinds

- Inflation and bond yields are likely to remain lower than in previous cycles

- Divergence in growth and policy across economies is likely to result in a number of market impacts, particularly a stronger dollar

News provided by

Invesco

Nov 19, 2014, 02:48 ET

NEW YORK, Nov. 19, 2014 /PRNewswire/ -- Invesco Fixed Income's senior leadership today provided their outlook for major financial markets for 2015. Given the relatively low yield environment and expectations that the US Federal Open Market Committee will begin to raise short term interest rates in 2015, Invesco Fixed Income believes the coming year will be one of increased volatility and one in which investors will benefit from active management.

"Given the differences in the growth dynamics of the world's economies and the diverging policies of major central banks, we believe strategies that offer tactical asset allocation and discriminating security selection should provide investors with the best opportunities to generate income and return," said Greg McGreevey, Head of Invesco Fixed Income. "We advocate non-traditional and multi sector fixed income management in this environment."

Since the global financial crisis, fixed income assets have been supported by a period of plentiful liquidity. The team now believes fixed income market valuations are relatively full. Chief Strategist Rob Waldner commented, "With the Fed having ended its quantitative easing program, we now have divergence among the policies of major central banks. We believe the Fed is likely to tighten next year, and with ongoing easy policies in places like Japan and Europe, we see room for the US dollar to strengthen."

Even with Fed tightening, however, Invesco Fixed Income expects the impact on US bond yields to be limited, with most of the impact on short to intermediate maturities. Longer term, IFI believes aging demographics in most major economies are likely to contain growth potential, inflation and bond yields globally. Near term, growth dynamics are likely to keep commodity prices under pressure. This, coupled with a stronger dollar, has left the team negative on many emerging market currencies. "Freely floating currencies in much of the developing world can absorb some of the pressure from weaker growth. We do not, however, foresee a crisis in emerging markets," added Waldner. "Considerable opportunity exists in China as internationalization of the currency is implemented, opening up new opportunities for investor diversification. We also believe India and Mexico look attractive."

For 2015, Invesco Fixed Income sees opportunities in both investment grade and high yield municipal bonds. These markets realized significant price appreciation in 2014 but the team still believes valuations are attractive relative to longer term history. The team also cites tax rates that are unlikely to decline as well as positive US growth as supportive for municipal bonds. Invesco Fixed Income also views senior secured bank loans as attractive and would look to invest opportunistically in high yield corporate bonds. Given the team's emphasis on multi-sector and non-traditional management, the team favors strategic income, multi-sector credit, absolute return and unconstrained bond strategies.

The opinions expressed are based on current market conditions and are subject to change without notice. This is not a recommendation of any particular strategy and is not an offer to buy or sell any financial instruments.

Invesco Fixed Income oversees a $241 billion fixed income platform (as of September 30, 2014) including retail and institutional offerings, globally. These strategies span the entire fixed income spectrum and are managed by a team of 160 fixed income professionals in 11 locations. Part of Invesco Ltd. (NYSE: IVZ), an independent global investment firm, Invesco Fixed Income is a pure play, fixed income platform with one objective – providing favorable investment results for clients around the world. Invesco Fixed Income is a business unit of Invesco Advisers, Inc., which provides investment advisory services and does not sell securities.

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SOURCE Invesco