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CONTRIBUTORS

Michael Hasenstab, Ph.D.

Portfolio Manager, Chief Investment Officer, Templeton Global Macro®

Calvin Ho, Ph.D.

Portfolio Manager, Director of Research, Templeton Global Macro

This month’s Global Macro Insights offers a comprehensive update on regional developments, along with analysis of the key opportunities and challenges shaping the current macroeconomic landscape.        

Key takeaways

April overview: The Middle East conflict continued to dominate news headlines in April, and oil prices remained at elevated levels. There was nevertheless some improvement in risk sentiment over the month compared to the earlier risk-off market reactions—the US dollar (USD) weakened, while US Treasury yields rose slightly and emerging market (EM) bonds gained over the month. Developed market central banks that held meetings during April left interest rates unchanged, but noted the risks to both growth and inflation outlooks from the war, and we see some signs of hawkishness creeping in. Some inflation data are already showing evidence of the impact of higher energy prices. Growth data mostly continued to show some resilience even as outcomes remained fairly soft.

Outlook: Uncertainty about growth and inflation stemming from the Iran conflict has dominated the conversation about the global economic outlook. The International Monetary Fund (IMF), in its latest World Economic Outlook (WEO), has modestly downgraded its global growth forecast, but notes that downside risks dominate the outlook, with these risks including a longer or broader conflict and worsening geopolitical fragmentation. It continues to project EM growth to significantly outperform advanced economies. Among EMs, we highlight that while resilience remains a notable broad factor, differing sensitivities and policy responses to the oil shock require careful country-by-country analysis. Uncertainty about the path of monetary policy also remains high under current circumstances, with various central banks pointing to growth and inflation risks stemming from the Iran conflict. Our thesis of “global rewiring” remains intact.

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WF: 10336209

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