Notes on Global Fixed Income Investing

The latest views on global markets from Templeton Global Macro.

The global economic cycle appears to be in relatively decent shape. There are some challenges in Europe and we expect some global headwinds from supply chain disruptions related to the coronavirus, as well as impacts to travel, tourism and consumer sectors. However, our biggest concerns on the global front are more about the political extremism we’re seeing around the world. The polarization across the political landscapes complicates many of the macro trends and adds risk to the financial cycle. The bifurcation across populations within countries, and between countries, has become increasingly fractured, leading to radical policy proposals.

In the US, there are concerns that the American dream that operated for over 50 years has come to a close . People are frustrated by widening income inequality those frustrations have fueled populist reactions across the political spectrum. The far right and far left are taking advantage of those political waves, offering untested political solutions that are nationalistic, anti foreign, anti immigration, anti trade, and fiscally extravagant. Those types of populist policies throughout history have not ended in good economic or financial market results.


All investments involve risks, including possible loss of principal. Special risks are associated with foreign investing, including currency fluctuations, economic instability and political developments. Investments in emerging 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. Because these frameworks are typically even less developed in frontier markets, as well as various factors including the increased potential for extreme price volatility, illiquidity, trade barriers and exchange controls, the risks associated with emerging markets are magnified in frontier markets. Bond prices generally move in the opposite direction of interest rates. Thus, as prices of bonds in an investment portfolio adjust to a rise in interest rates, the value of the portfolio may decline. Changes in the financial strength of a bond issuer or in a bond’s credit rating may affect its value. High yields reflect the higher credit risks associated with certain lower-rated securities held in the portfolio. Floating-rate loans and high-yield corporate bonds are rated below investment grade and are subject to greater risk of default, which could result in loss of principal—a risk that may be heightened in a slowing economy.