What’s an investor to do, when faced with a Fed that’s gearing up to raise rates? Many investors over the past year have poured money into bank loans, in hopes of finding a panacea. Unfortunately, the bank loan market is not what it seems.
Recent data have supported our view that the drivers of the US economy’s solid expansion remain in place, and should allow the US Federal Reserve (Fed) to move further toward its goal of normalizing interest rates. Some data releases have clearly been skewed by the recent major hurricanes, but we feel any negative impact on the economy is likely to be transient and outweighed by demand arising from reconstruction.
It’s not normal. When a fixed-income sector beats the S&P 500 over an extended period and by a meaningful amount, investors do a double take.
The issues that have dominated news cycles in recent weeks should not obscure the robust underlying fundamentals of the US economy, in our view. Though some short-term weather-related disruption is possible, the economy seems to be maintaining its path of moderately strong growth, aided by healthy contributions from consumer spending and business investment.
In this month’s Global Economic Perspective, Franklin Templeton Fixed Income Group takes a look at recent US economic data, and increased skepticism among many market participants about whether the Federal Reserve will implement another increase in interest rates before the end of the year.
We’re in a late-cycle, momentum-driven market, where valuation is at an extreme. Momentum can drive markets beyond fundamentals for an extended period. No investment process is going to pick the peak in the cycle, but we’d lean out as the risks increase.
Historically, we have not been able to find many interesting, really high quality companies in China which has largely centered on our discomfort with corporate structures, governance and alignment between majority and minority shareholders. While this continues to be the case, recent trips by members of the team have certainly provided plenty of food for thought.
A year ago, Templeton Global Equity Group’s Norm Boersma, Cindy Sweeting and Heather Arnold penned an article for Beyond Bulls & Bears discussing the signs of a revival in value stocks. With the nascent rally in global value stocks underway, the trio return along with their colleague Tucker Scott to outline where they now see the next pockets of overlooked potential opportunities for patient bargain hunters.
In this month’s Global Economic Perspective, Franklin Templeton Fixed Income Group examines whether inflation may gain momentum in the United Sates, why it’s pleased the European Central Bank has resisted tapering of its quantitative easing program and why investors in all markets need to be cognizant of political risks.
Political risk, reform efforts and potential monetary policy shifts cloud the outlook for China, Europe and the U.S.