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TEMPLETON GLOBAL MACRO®

Quantitative easing (QE) by the US Federal Reserve (Fed) has played an influential role in global financial markets over the past decade. In September this year, the Fed confirmed plans to begin unwinding its QE holdings in October. Yet asset prices have generally been unaffected by the news, reflecting a sense of complacency. Templeton Global Macro believes risks and challenges are ahead on the Fed’s road to policy normalization, with three factors that have potential to push bond yields higher than market expectations.

The Elephant in The Room

What lies ahead on the Fed’s road to policy normalization? Dr. Hasenstab discusses what he thinks the market is missing.

Economic and Market Implications of The Great Unwinding

What does the Fed’s quantitative tightening mean to investors? Dr. Hasenstab breaks down the forces that he thinks will likely take inflation and US Treasury yields to new highs.

Contributors

Michael Hasenstab, Ph.D.

Portfolio Manager, Chief Investment Officer, Templeton Global Macro®

Sonal Desai, Ph.D.

Portfolio Manager, Director of Research, Templeton Global Macro ®

Calvin Ho, Ph.D.

Deputy Director of Research, Templeton Global Macro ®

Diego Valderrama, Ph.D.

Vice President, Senior Global Macro & Research Analyst, Templeton Global Macro®

Attila Korpos, Ph.D.

Senior Global Macro & Research Analyst, Templeton Global Macro®

Shlomi Kramer, Ph.D.

Senior Global Macro & Research Analyst, Templeton Global Macro ®

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 in an investment portfolio adjust to a rise in interest rates, the value of the portfolio may decline. Special risks are associated with foreign investing, including currency fluctuations, economic instability and political developments. Investments in developing markets, of which frontier markets are a subset, 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.

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