RATES IN FOCUS: WHAT TO DO NOW

With US inflation on the rise, should investors be concerned?

What our managers think about
inflation and interest rate expectations

Growth, Rates and Inflation

With growth has come inflation, raising the question: will it be temporary, or more persistent?

Western Asset: “While the US might see GDP growth of 7%-8% this year, it seems likely to decelerate next year to maybe 3%. It would be very uncommon to have inflation accelerate when you have GDP growth decelerating that sharply.”

Franklin Templeton Investment Solutions: “The Fed and other central bankers have communicated a willingness to raise rates in the future, but should those expectations be pulled forward? We don't think so.”

Brandywine Global: “If the Fed truly intends to be successful in achieving its inflation goal...we don't think that can happen without another leg down on the dollar, which would really play to a non-dollar exposure in global fixed income.”

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Western Asset

Inflation Update—Temporary or Persistent?

“The temporal goods supply/demand mismatch . . . is likely at or close to its zenith.”

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VIDEO: Why High Growth Rates May Not Be Sustainable

“I think it’s really important when you think through the fiscal impulse, yes, you’re getting a big impulse this year, but what happens after that is likely to be an order of magnitude smaller.”

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Franklin Templeton Fixed Income

Too Much of a Good Thing?

“As the government keeps adding a staggering amount of stimulus to an already recovering economy, the question we need to ask is: Will the economy overheat and inflation pressure build beyond the current sanguine expectations?”– CIO Sonal Desai

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More Thoughts From Our Managers

Fine-tuning fixed income:
strategies that can help now

Uncertainty about inflation and yields in the bond market creates both opportunities and challenges. Some strategies are designed for all seasons, to help manage through the uncertainty, for example: Western Asset Core Bond Fund and Western Asset Core Plus Bond Fund. You might also have more specific goals for fixed income holdings in a client’s portfolio such as income generation, ballast or diversification.

income generation

INCOME GENERATION
Choices to generate meaningful income in today’s low-rate environment


Franklin Municipal Bond Strategies

  • Comprehensive suite of tax-free income focused portfolios
  • Emphasis on risk management

Franklin High Income Fund

  • High yield corporate bond strategy driven by fundamental analysis
  • Seeks high current income with potential capital appreciation

Beyond Fixed Income

Franklin Income Fund

  • Flexible value-oriented strategy mixing stocks and fixed income
  • Seeks to maximize income with potential capital appreciation

Clarion Partners Real Estate Income Fund (CPREIF)1

  • Direct access to institutional-quality private real estate
  • Seeks current income and long-term capital appreciation
ballast

BALLAST
Choices to help limit the potential impact of higher rates this year


Western Asset Short-Term Bond Fund

  • Focused on investment grade securities with average effective maturity of 3 years or less
  • Seeks current income with capital preservation and liquidity

Western Asset Ultra-Short Income Fund

  • Short-term investment grade debt portfolio with duration of 1 year or less
  • Seeks current income with capital preservation and liquidity

Franklin Liberty Short Duration U.S. Government ETF (FTSD)

  • 80% of assets in securities issued or guaranteed by U.S. or its agencies
  • Seeks high current income as well as capital preservation
diversification

DIVERSIFICATION
Choices to help balance the portfolio risks of traditional fixed income


BrandywineGLOBAL-Flexible Bond Fund

  • Nimble global bond strategy that adapts to market conditions
  • Seeks income and capital appreciation

Beyond Fixed Income

Franklin K2 Alternative Strategies Fund

  • Allocations to multiple alternative strategies and managers
  • Seeks capital appreciation with less volatility than broad equity markets
core fixed income

CORE FIXED INCOME
Strategies offering a solid foundation of investment-grade fixed income to help anchor diversified portfolios


Western Asset Core Bond Fund

  • Seeks to maximize total return from high-quality, U.S. dollar-denominated fixed income
  • Supported by Western Asset’s value-oriented philosophy, drawing on both macro and fundamental insights

Western Asset Core Plus Bond Fund

  • Actively managed core bond strategy with limited exposure to opportunistic debt sectors
  • Seeks to maximize total return with broad diversification among key investment themes

CONTACT US TO
STRESS TEST YOUR PORTFOLIO

Our Portfolio Consulting Services team can conduct a customized stress test on your portfolios to gauge the impact of different interest rate scenarios. Call 1-800-DIAL-BEN to get the process started or fill out the form below to request a sample report.




Your consultation will include:

  • Historical stress test comparisons
  • Equity and macro scenario stress tests
  • Fixed income scenario stress tests
  • Portfolio asset correlations

Financial Professionals Only