U.S. equity indexes continue to post record highs and the proverbial "wall of worry" appears to be losing bricks. The high expectations for earnings season have largely been bested, the U.S. economy continues to trend in a "Goldilocks" zone—not too hot, nor too cold...
Monetary Policy Rules: Revisited and Giving Japan Credit
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In this month’s Global Economic Perspective, Franklin Templeton Fixed Income Group dives into diverging central bank policy and weighs in on whether the European Central Bank is likely to be less accommodative—and what its timing might look like.
The environment for U.S. and global stocks continues to be in decent shape, but some risks are elevated and the possibility of a pullback exists. A notable potential driver of bouts of volatility could be U.S. and global central bank policy as they sail toward monetary policy normalization.
When the Federal Reserve raises rates by another quarter percentage point on Wednesday, you're going to see many stories about monetary policy getting tight and the potential threat that poses for the economy in general and the bull market in stocks in particular.
Forty years of behavioral science research provides a more realistic framework for viewing investors and markets than does MPT.
We are having a hard time finding high-quality companies at attractive valuations.
Goldilocks appears to be taking up residence on Wall Street, with modest growth, low inflation and a cautious Fed combining to make things "just right" for investors. Additionally, the apparent improving global trade trend could help contribute to further stock market gains and support large-cap outperformance. But the risk of a pullback and/or sharp acceleration in volatility is elevated courtesy of both domestic and world political uncertainty, and the potential of a Fed misstep.
We think there are ample catalysts for ongoing corporate earnings growth. Growth appears to be broadening to more cyclical parts of the economy, such as manufacturing, as well as outside the U.S. The political climate – including the outcome of the remaining elections across Europe and President Donald Trump’s political agenda – is evolving. We think it will be difficult to predict Trump’s next move, but think tax reform is likely to remain on the agenda this year.