Insights from Franklin Templeton and its specialist investment managers Brandywine Global, Western Asset and Martin Currie
HONG KONG/SINGAPORE, December 13, 2023 – Franklin Templeton and three of its specialist investment managers provide their annual outlooks for the global economy and key asset classes.
Commenting on income opportunities and asset allocation for uncertain markets, Ed Perks, Chief Investment Officer, Franklin Income Investors, said:
“Although inflation remains high, monetary policy tends to have a lagged and variable effect. In our view, we could start seeing the lagged effect of the Fed’s tightening efforts in a more material way in the first quarter of 2024. Additionally, the markets generally expect the US economy to slow, although maybe not the recession that market participants were fearing earlier this year. The trajectory for the Consumer Price Index heading into 2024 appears to be a continued downward movement, albeit slowly. While inflation has likely peaked, the rest of the way toward the Fed’s 2% target could prove to be more challenging. We believe rates could stay on hold and be higher for longer.
From an asset allocation standpoint, we continue to prefer high-quality fixed income due to what we consider attractive yields and longer-term total return potential. We have modestly pulled back on high-yield bonds as higher rates may put greater strain on many non-investment-grade balance sheets. We continue to maintain a diversified exposure to equity sectors that we think can generate income and participate in a broad-based equity market advance. Within equities, we prefer high-quality dividend stocks where valuations have become a bit more palatable, in our opinion.”