Skip to content

RESOURCES

Talking Trade Tensions, Inflation and Volatility

The first quarter of 2018 started like a lamb but went out like a lion as long-dormant volatility began to roar. Inflation fears, trade tensions and geopolitical risks contributed to market turbulence, leaving many investors wondering whether these issues will put a damper on global growth – and end the US market’s nine-year bull run. Franklin Templeton’s senior investment leaders continue to see strong fundamentals to counter the concerns.

Attractive Growth Prospects Ahead – Will Trade Disputes Create a Headwind?

Global GDP Growth Estimates (% Change Year Over Year)1
2018-2022

While the fundamental backdrop looks strong overall, recent trade tensions represent one of the bigger risks we see.

The global economy appears to be maintaining strength, with projected 2018 GDP growth expectations at 4.7% for major advanced economies and 7.3% for emerging market economies, and continuing at a strong pace through 2022. For the most part, the global economy is experiencing coordinated growth in a way we haven’t seen in a long time, if ever. Our senior investment leaders discuss how trade disputes may impact global growth.

US, China and Beyond: The Impact of Trade on Global Growth

Date Recorded: 12 April 2018

Inflation Has Been Muted Despite a Strong Labor Market

US Personal Consumption Expenditures & US Unemployment Rate
31 December 2007 – 28 February 20182

We anticipate inflation will likely tick up at a gradual pace.

The US market’s nine-year bull run is about to enter its 10th year accompanied by global growth and US unemployment at 4.1%. Our fixed income CIO shares his view on what factors may continue to be a restraining influence on inflation, while our head of equities suggests what a return to normalization may mean for valuations.

Inflation: is it a Real Threat?

Date Recorded: 12 April 2018

The Hunt for Yield has Steered Non-US Investors to The US Municipal Market…

Non-US Holdings of US Municipal Debt (Billions) & Share of Total US Municipal Debt Held Outside the US(%)3 2007–2017

Growing demand from non-US buyers signifies a tremendous search for yield on a global basis.

…in Search of Higher Yields

Yields of Select US Municipal and Global Government Bonds

As of 31 March 2018

US municipal bonds offer a competitive yield

It’s been a challenging environment for investors seeking income and yield. Our panel weighs in on potential income opportunities and the demand outlook for the municipal bond market.

Watch The Full-length Video

Date Recorded: 12 April 2018

Outlook Contributors

Stephen H. Dover, CFA

Head of Equities

Michael Hasenstab, Ph.D.

Chief Investment Officer,
Templeton Global Macro

Christopher Molumphy, CFA

Chief Investment Officer, Franklin Templeton Fixed Income Group®

Ed Perks, CFA

Chief Investment Officer, Franklin Templeton Investment Solutions

Manraj Sekhon, CFA

Chief Investment Officer, Franklin Templeton Emerging Markets Equities

WHAT ARE THE RISKS?

All investments involve risks, including possible loss of principal. Bond prices generally move in the opposite direction of interest rates. Thus, as the prices of bonds adjust to a rise in interest rates, the share price may decline. Investments in foreign securities involve special risks including currency fluctuations, economic instability and political developments. Investments in emerging market countries involve heightened risks related to the same factors, in addition to those associated with these markets’ smaller size, lesser liquidity and lack of established legal, political, business and social frameworks to support securities markets. Such investments could experience significant price volatility in any given year. High yields reflect the higher credit risk associated with these lower-rated securities and, in some cases, the lower market prices for these instruments. Interest rate movements may affect the share price and yield. Stock prices fluctuate, sometimes rapidly and dramatically, due to factors affecting individual companies, particular industries or sectors, or general market conditions. Treasuries, if held to maturity, offer a fixed rate of return and fixed principal value; their interest payments and principal are guaranteed.

IMPORTANT LEGAL INFORMATION

These materials reflect the analysis and opinions of the authors as they intended on the stated publication dates, and may differ from the opinions of other portfolio managers, investment teams or platforms at Franklin Templeton Investments. It is intended to be of general interest only and not construed as individual investment advice or a recommendation or solicitation to buy, sell or hold any security or to adopt any investment strategy. It does not constitute legal or tax advice.

Links can take you to third-party sites/media, directly or through new browser windows. We urge you to review the privacy, security, terms of use, and other policies of each site you visit. You use any third-party site, software, and materials at your own risk. Franklin Templeton Investments (FTI) does not control, adopt, endorse or accept responsibility for content, tools, products or services (including any software, links, advertising, opinions, or comments) available on or through third party sites or software.

The comments, opinions and analyses are the personal views expressed by the investment manager and are intended to be for informational purposes and general interest only and should not be construed as individual investment advice or a recommendation or solicitation to buy, sell or hold any security or to adopt any investment strategy. It does not constitute legal or tax advice. The information provided in this material is rendered as at publication date and may change without notice and it is not intended as a complete analysis of every material fact regarding any country, region, market or investment. Reliance upon information in any posting on this site is at the sole discretion of the viewer.

IMPORTANT LEGAL INFORMATION

This material is intended to be of general interest only and should not be construed as individual investment advice or a recommendation or solicitation to buy, sell or hold any security or to adopt any investment strategy. It does not constitute legal or tax advice. This material may not be reproduced, distributed or published without prior written permission from Franklin Templeton.

The views expressed are those of the investment manager and the comments, opinions and analyses are rendered as at publication date and may change without notice. The underlying assumptions and these views are subject to change based on market and other conditions and may differ from other portfolio managers or of the firm as a whole. The information provided in this material is not intended as a complete analysis of every material fact regarding any country, region or market. There is no assurance that any prediction, projection or forecast on the economy, stock market, bond market or the economic trends of the markets will be realized. The value of investments and the income from them can go down as well as up and you may not get back the full amount that you invested. Past performance is not necessarily indicative nor a guarantee of future performance. All investments involve risks, including possible loss of principal.

Any research and analysis contained in this material has been procured by Franklin Templeton for its own purposes and may be acted upon in that connection and, as such, is provided to you incidentally. Data from third party sources may have been used in the preparation of this material and Franklin Templeton ("FT") has not independently verified, validated or audited such data.  Although information has been obtained from sources that Franklin Templeton believes to be reliable, no guarantee can be given as to its accuracy and such information may be incomplete or condensed and may be subject to change at any time without notice. The mention of any individual securities should neither constitute nor be construed as a recommendation to purchase, hold or sell any securities, and the information provided regarding such individual securities (if any) is not a sufficient basis upon which to make an investment decision. FT accepts no liability whatsoever for any loss arising from use of this information and reliance upon the comments, opinions and analyses in the material is at the sole discretion of the user.

Franklin Templeton has environmental, social and governance (ESG) capabilities; however, not all strategies or products for a strategy consider “ESG” as part of their investment process.

Products, services and information may not be available in all jurisdictions and are offered outside the U.S. by other FT affiliates and/or their distributors as local laws and regulation permits. Please consult your own financial professional or Franklin Templeton institutional contact for further information on availability of products and services in your jurisdiction.

Issued in the U.S. by Franklin Templeton, One Franklin Parkway, San Mateo, California 94403-1906, (800) DIAL BEN/342-5236, franklintempleton.com. Investments are not FDIC insured; may lose value; and are not bank guaranteed.

You need Adobe Acrobat Reader to view and print PDF documents. Download a free version from Adobe's website.

CFA® and Chartered Financial Analyst® are trademarks owned by CFA Institute.