Where is the global economy and what are its implications for investment? Three Franklin Templeton Directors of Valuation Funds 2022 offer their vision.
Where is the global economy and what are its implications for investment? Three of the managers Templeton Franklin with People Funds Classification 2022 They give their vision.
macro context
In the opinion of Derek Deutschmanager of Clairbridge American Sustainability Leaders FundAnd the The chances of a recession in the US are 75%. What makes a manager not 100% convinced of a downturn in the economy? On the one hand, inflation. “The CPI may have already peaked In the United States, with the normalization of factors such as supply chains.” This would lead to Federal Reserve to pivot Its strategy is to be neutral or at least be less aggressive.
On the other hand, the Flexibility of the labor market in North America. Unemployment in the United States is still very low, and it is certainly far from what one might expect in a recession. Deutsch stresses that “initial unemployment claims are at their lowest level in 50 years.” It is the main indicator that the manager is watching and at the moment does not give cause for fear.
Will PhoneAssociate Director of Brandywine Global Income Optimiser Fundhas a similar view: “It is important to remember the indicators that lead the way for the Fed.” Until employment and housing cracks appear, the US central bank won’t stop. But Vaughan insists that even after 300 basis points US rates have risen, consumer health has not deteriorated.
more negative David Zangmanager of Franklin short-term Eurobond fund, with the prospects of Europe. appointed 98% probability of a recession in Europe. He even sets up an appointment: The end of 2022 or the first quarter of 2023. “The European Central Bank is raising interest rates, but the inflation it is facing is not due to increased demand but to external factors. I see that this winter is likely to be there Gas rationalization measures in Europe “.
So, calculate that The European Central Bank will raise interest rates to only 2% this year. “You have to remember that until three months ago they had an accommodative monetary policy,” he asserts. Currently
Idea 1: European fixed income
However, the stagnation that Zhan Hu is anticipating is Slight deflation because there will be financial support. He discovers that “the EU is getting used to spending”. Precisely for this reason, the director finds European fixed income interesting. Specifically, the Investment grade credit. Unlike US debt, the short end of the European curve Already priced slack. Now you can buy 3-year bonds Give 3.5-4%. Thinking about where we’d be at that time, it seems to me One of the best opportunities right now“, Confirms.
You even find interesting ideas in the government. For example, he points to Estonia, whose 10-year issue is listed with a risk premium of 200 basis points, penalized for being geographically close to Russia. However, the director highlights how the European country has the lowest debt-to-GDP ratio. “I would say you have to start buying, slowly, but you have to start. In a couple of years we will look back at this moment and wish we had bought more“, pridect.
Idea 2: US fixed income
Instead, Vaughan will look at the other end of the curve if he looks at US assets. With the Fed pushing hard to the front of the curve, the director says, something must go wrong. Of course everything has a price. In his view, the long part of the curve The US Treasuries’ move at 3.6% appears to be a very interesting point. We didn’t get in all of a sudden, but we have the cash ready. So if I had to look at something, I would do it in that area.
Idea 3: Stock
Despite the S&P 500’s 22% correction so far this year, Deutsch does not rule out that complications could squeeze further. In this context, the director thinks so Periodic names are more vulnerable. Instead, sustainable leaders, where their portfolio is focused, have strong balance sheets, generate free cash flow and seek solutions to current problems (which keep their demand strong). Thus, the expert agrees with his colleagues in the defense that this is a period in which one should enter the market rather than leave it. And if it does, it calls for a focus on high-quality companies and growth.
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