Allocation Views

Stabilization amid heightened uncertainties.

Franklin Templeton Multi-Asset Solutions

PREVIEW

The new year started with a bout of volatility, driven by tensions in the Middle East. US forces assassinated General Qassem Soleimani, leader of Iran’s Revolutionary Guard Corps, which grabbed headlines and moved markets for several days. However, Iran’s measured response, avoiding the escalation that some had feared, allowed the initial phase of the crisis to blow over quickly.

The price of crude oil returned to levels that were seen before the initial attack on January 3, limiting the likely impact on economic activity. Global equity indexes shrugged off the events and moved to new all-time highs. Overall, it appears that investors remain optimistic about the path of global economic growth, with easing trade tensions between the United States and China offering support.

Economic stabilization seems to be occurring amid supportive effects of accommodative monetary policy in both developed and emerging economies. However, despite our proprietary indicators of growth momentum leveling off more recently, we don’t see evidence of a sharp rebound in activity or a high probability of governments delivering the fiscal measures that would support such a move.