Franklin Templeton’s global investment outlook: a broadening opportunity set
Markets have defied expectations—performing well in the face of economic challenges.
“But as we head towards the end of this year the question is whether the investment climate will begin to turn bleak,” asks Stephen Dover, Chief Market Strategist at Franklin Templeton Institute.
In its latest global investment outlook leading investment teams from Franklin Templeton provide a visual example and details on the investment opportunities they are most focused on today.
Dover says: “Many of our highlighted investment opportunities from mid-2023 remain in place as we look toward year-end, with some subtle tilts. Today, we see a much broader opportunity set across asset classes and regions.
“Fixed income has returned as an effective diversifier, justifying an increasing allocation in a balanced portfolio and extending duration beyond cash.
“Within the equities space, investors may want to consider moving beyond the “Magnificent Seven” US technology names.
“Mid-cap and small-cap businesses offer more potential for innovation and disruption than large-cap businesses. In addition, defensive equities with more resilient earnings streams may be poised to rebound as they have become more attractively valued relative to more economically sensitive sectors.
Also read: Is It Finally Time To Get Long of Bonds?
“Specific to fixed income:
- Within the credit space, attractive yields across various maturities and instruments offer the most compelling income opportunities we have seen in 15 years.
- There is an opportunity to rotate from quality dividend-paying companies into higher-quality fixed income, picking up substantial yield from lower-risk assets.
- Agency mortgage-backed securities are offering similar yields to investment-grade bonds but with less credit risk and lower duration risk. For the first time in 20 years, mortgage bonds have a higher yield than stocks.
- The current US Treasury yield curve inversion is pricing in substantial monetary policy loosening amid a weakening economy, but not all our teams agree on the timing of the first US interest-rate cut.
- There is more reason to be optimistic about Japan than there has been in years, and the Japanese yen is looking significantly undervalued to us.”
