Monthly insights and updates from the Invesco Fixed Income team.
We are positive on fundamentals for the rest of this year. Global growth is solid and inflation is tame. While no longer as synchronized as in 2017, the world’s major economic regions are still growing above potential. Inflation is low, especially in Europe and Japan where it remains below official targets. As central banks have pivoted away from stimulus, tighter financial conditions have hurt risky assets. But major central bank policies are still generally easy. We expect the US Federal Reserve (Fed) to tighten gradually and the runway for other central banks to normalize policy is still long. Nevertheless, political uncertainty, trade tensions and a sell-off in emerging markets have challenged investors in recent months. We expect these factors to generate further volatility and believe caution is warranted. However, we believe greater volatility will generate new opportunities for investors, given the backdrop of solid macro and credit fundamentals. Below are five risks we are watching and our potential response across portfolios.
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