2018 GLOBAL INVESTMENT OUTLOOK - Reflections on Growing Economies and Fading Stimulus - Franklin Templeton Investments
←
→
Page content transcription
If your browser does not render page correctly, please read the page content below
2018 GLOBAL INVESTMENT OUTLOOK Reflections on Growing Economies and Fading Stimulus
2018 GLOBAL INVESTMENT OUTLOOK 2 | GLOBAL MACRO OUTLOOK
Identifying Value and Avoiding Price Distortions
in the Post-QE Era
WHAT’S Michael Hasenstab, Ph.D.
INSIDE 5 | MULTI-SECTOR FIXED INCOME OUTLOOK
Constructive but Cautious for 2018
Christopher J. Molumphy, CFA
8 | GLOBAL EQUITY OUTLOOK
As the Era of Cheap Money Comes to an End,
Non-US Markets Look Poised to Stand Out in 2018
Stephen H. Dover, CFA
10 | MULTI-ASSET INVESTING OUTLOOK
Optimism and Selectivity in 2018: Business Fundamentals
in Focus as Stimulus Fades from Financial Markets
Edward D. Perks, CFA
13 | LONG-TERM CAPITAL MARKETS OUTLOOK
Chandra Seethamraju, Ph.D.
15 | MORE INVESTMENT INSIGHTS ONLINE
WHAT ARE THE RISKS?
All investments involve risks, including possible loss of principal. Stock prices
fluctuate, sometimes rapidly and dramatically, due to factors affecting individual
companies, particular industries or sectors, or general market conditions. Stocks
historically have outperformed other asset classes over the long term, but tend to
fluctuate more dramatically over the short term. Special risks are associated with
foreign investing, including currency fluctuations, economic instability and political
developments. Investments in emerging markets, of which frontier markets are a
subset, involve heightened risks related to the same factors, in addition to those
associated with these markets’ smaller size, lesser liquidity and lack of established
legal, political, business and social frameworks to support securities markets.
Because these frameworks are typically even less developed in frontier markets, as
well as various factors including the increased potential for extreme price volatility,
illiquidity, trade barriers and exchange controls, the risks associated with emerging
markets are magnified in frontier markets. Bond prices generally move in the
opposite direction of interest rates. Thus, as the prices of bonds in an investment
portfolio adjust to a rise in interest rates, the portfolio’s value may decline. Changes
in the financial strength of a bond issuer or in a bond’s credit rating may affect its
value. Floating-rate loans and high-yield corporate bonds are rated below
investment grade and are subject to greater risk of default, which could result in
loss of principal—a risk that may be heightened in a slowing economy. Derivatives,
including currency management strategies, involve costs and can create economic
leverage in a portfolio, which may result in significant volatility and cause the
portfolio to participate in losses (as well as enable gains) on an amount that
exceeds the portfolio’s initial investment.
Not FDIC Insured May Lose Value No Bank Guarantee
December 2017
Franklin Templeton Investments marked its
70th anniversary as an organization in
2017. Throughout our history, we have
experienced perhaps every conceivable
market environment—none so fresh in our
minds than the events of a decade ago.
What started as a contained subprime
mortgage situation in the United States
ended as a full-blown global financial crisis.
Greg Johnson
Bank lending around the world seized up,
Chairman of the Board, Chief Executive Officer
and the fallout impacted venerable firms
Franklin Resources, Inc.
alongside broader stock and bond indexes.
Over the next 10 years, we saw global
monetary policies of epic proportions
implemented to address the crisis. Clear signs of recovery have taken hold since then, leading in 2017 to strong advances in many
types of financial assets this year, along with positive and strengthening growth across the global economy.
The year ahead is now set to see key central banks cut back on their crisis-born programs. It’s an ongoing example of a key lesson
from the post-crisis period: the importance of continually adapting to change. It’s also an environment we think calls for active
management based on disciplined, fundamental research.
At Franklin Templeton, the strength of our firm is the strength of our people. This strength is on display in the pages that follow,
which spotlight our investment expertise in key areas.
We’ve titled our global investment teams’ outlook on 2018—particularly the opportunities and challenges at this stage of the
economic cycle—as “Reflections on Growing Economies and Fading Stimulus.” We hope these insights will be valuable to you as
you prepare to make important decisions about your portfolios.
On behalf of the firm’s more than 9,000 employees around the world, I’d like to thank you for the trust you place in us and extend
my very best wishes for a prosperous 2018.
Greg Johnson
2018 GLOBAL INVESTMENT OUTLOOK | 1
Global Macro Outlook
Identifying Value and Avoiding Price Distortions in the Post-QE Era
2018 OUTLOOK: “We expect the reversal of quantitative easing, rate hikes and rising inflation
pressures in the US to be among the most impactful factors for global financial markets in the
upcoming year.”
For nearly a decade, financial markets
have surfed a wave of low-cost money in
the US, courtesy of the US Federal
Reserve’s (Fed’s) massive quantitative
easing (QE) programs that were launched
after the global financial crisis (GFC) of
2007–2009. The expansion of the Fed’s
balance sheet from around US$900 billion
in 2008 to nearly US$4.5 trillion today has
arguably been the most dominant force
shaping global financial markets. QE has
driven down yields and pushed up asset
prices, steering many investors toward Michael Hasenstab, Ph.D.
riskier assets while keeping the costs of Chief Investment Officer
capital artificially suppressed. This has Templeton Global Macro
distorted valuations in bonds and in
equities. In short, the era of QE has
created a seemingly complacent market
that views persistently low yields as a
permanent condition. However, these deregulation by both the Trump post-QE era may be exposed to significant
conditions are administration and potentially a Jerome risks, in our view. Markets could see sharp
neither normal Powell Fed. The Fed is projected to unwind corrections to UST yields in upcoming
nor permanent, US$1.5 trillion from its balance sheet over quarters, similar to the magnitude and
in our the next three years. At the same time, speed of adjustments that occurred during
assessment, major foreign buyers of USTs from prior the fourth quarter of 2016. We think it is
and we expect years have notably stopped acquiring critical not only to defend against current
the reversal of USTs over the last few years. China has UST risks but to structure portfolios to
QE by the Fed reduced its foreign reserves by around potentially benefit as rates rise.
to meaningfully US$1 trillion, while oil exporting nations like
The challenge for investors in 2018 will be
impact financial Saudi Arabia have similarly become net
that the traditional diversifying relationship
markets in 2018 borrowers instead of lenders, no longer
between bonds and risk assets may not
and beyond. buying massive levels of USTs. Now the
hold true in this new cycle of UST declines.
Fed will also be departing that market,
It’s quite possible to see risk assets also
further driving down the supply of UST
Rising US Treasury Yields decline as the “risk-free” rate (yield on
buyers. At the same time, overall UST
Present Multiple Risks USTs) ratchets higher. Markets have
borrowing remains on an upward trend.
A number of factors are poised to pressure become accustomed to exceptionally low
This leaves price-sensitive domestic US
US Treasury (UST) yields higher, in our discount rates—a shift higher would
investors to predominantly fill the void. We
view, including the aforementioned reversal materially impact how those valuations are
expect those dynamics to put upward
of QE as the Fed unwinds its balance calculated. Additionally, we’ve seen a
pressure on UST yields.
sheet, but also the exceptional strength in sense of complacency develop across the
US labor markets, rising wage and inflation Investors who are not prepared for the shift asset classes as UST returns and risk
pressures, ongoing resiliency in the US from the recovery era of monetary asset returns have often had positive
economy, and a structural shift toward accommodation to the expansionary correlations, along with positive
— Continued
2 | 2018 GLOBAL INVESTMENT OUTLOOK
GLOBAL MACRO OUTLOOK
Domestic Private Investors Projected to Sharply Raise Their Higher rate differentials are also crucial in a
Share of US Treasuries rising-rate environment. Brazil and Mexico
Net Borrowing from the Public have short-term yields around 7%, India
2005–2020 (Projected) and Indonesia around 6%, and Argentina
USD Billions around 25% (as of November 2017). If US
$6,000
rates rise by 100 or 200 basis points, these
$5,000 countries have more cushion to absorb rate
pressures. By contrast, emerging markets
$4,000 with macro imbalances or low rate
30%
environments should be impacted harder
$3,000
by rising rates. Countries like Turkey or
78%
$2,000 Venezuela remain fundamentally
33% 44% vulnerable to a rate shock, in our view.
$1,000
Another group of potentially vulnerable
$0
countries are those with lower rates, such
as South Korea or Singapore, which
-$1,000 despite strong macro fundamentals could
also be vulnerable to currency depreciation
-$2,000
as the yield differential with the US flips.
2005–2008 2009–2012 2013–2016 2017–2020 (Projected)
Foreign Official Other Foreign Domestic Investors Fed Other US Government
Thus we think the key to emerging-market
allocations in 2018 will be to avoid the
Source: Calculations by Templeton Global Macro using data sourced from Congressional Budget Office, US Bureau of the
Fiscal Service, US Treasury Department, US Federal Reserve. There is no assurance that any projection will be realized. broad beta risks and find those
idiosyncratic sources of alpha
(performance above the market return) that
performance. However, the positive correlated to broad-based beta (market)
can withstand rising rates.
outcomes achieved under the benefit of risks. Countries that are more domestically
extraordinary monetary accommodation driven and less reliant on global trade often In the major developed economies, we
can mask the actual underlying risks in have those idiosyncratic qualities along continue to see unattractive bond markets,
those asset categories. As monetary with inherent resiliencies to global shocks. particularly the low to negative yields in the
accommodation unwinds, those positive A select few have already demonstrated eurozone and Japan. As rates rise in the
correlations could continue but with the that resilience in recent years, notably US, we expect the widening rate
opposite effect—simultaneous declines Indonesia. For others, economic risks are differentials with the eurozone and Japan
across bonds, equities and global risk related to the reforms underway within their to weaken the euro and yen against the US
assets as we exit an unprecedented era of country, rather than what happens dollar.
financial market distortions. These are the externally, such as in Brazil or Argentina.
types of correlations and risks we are
aiming to avoid in 2018.
Specific Emerging Markets Offer
“
Idiosyncratic Value
The impact of Fed policy tightening on
The impact of Fed policy tightening on emerging
emerging markets should vary from country markets should vary from country to country in
the upcoming year.
”
to country in the upcoming year. There are
still attractive valuations in specific
countries, but not all emerging markets will
fare well as rates rise, in our assessment.
It’s important to identify countries with
idiosyncratic value that may be less
— Continued
2018 GLOBAL INVESTMENT OUTLOOK | 3
GLOBAL MACRO OUTLOOK
Higher Yields Available in Select Emerging Markets
Government Bond Yields: Two- and 10-Year Yields
As of November 1, 2017
12.0%
10.2%
10.5%
9.3%
9.0%
7.2%
6.9%
7.5% 6.7% 6.7%
6.0%
4.5%
4.0%
4.5% 3.5%
2.6% 2.5%
3.0% 2.3% 2.0%
1.3%
1.5% 0.4%
0.1%
8.3% 7.6% 7.0% 6.1% 6.4% 5.1% 3.3% 2.8% 1.6% 1.8% 2.1% 1.6% 0.2
1.4%
0.0% 0.4%
-0.2% -0.8%
-1.5%
Brazil South Mexico Indonesia India Colombia Malaysia Chile Poland Australia South US Canada UK Japan Germany
Africa Korea
Two-Year Yields 10-Year Yields
Source: Bloomberg. Past performance does not guarantee future results.
We Expect Inflation and US companies stockpiled cash while credit with existing inflation pressures in the US
Treasury Yields to Rise in 2018 activity remained constrained by post-GFC economy and labor markets leads us to
As we look ahead in 2018, we expect the regulations, such as the Dodd-Frank Act. expect higher inflation and higher UST
reversal of QE, rate hikes and rising However, the factors that previously limited yields in the upcoming year. We think
inflation pressures in the US to be among inflation and money creation over the last investors need to consider preparing for
the most impactful factors for global decade are also now approaching their these risks.
financial markets in the upcoming year. end. Deregulation efforts through executive
When the first rounds of QE were initially action are already underway, while credit
deployed by the Fed nearly a decade ago, activity has been accelerating. In short, the
many skeptics argued that pumping money credit expansion and money velocity1 that
into the financial system would cause high did not materialize over the last decade is
inflation. But inflation never accelerated, in just beginning to take shape. This potential
part because banks and financial acceleration in money velocity combined
“ The factors that previously limited inflation and money creation over the
last decade are also now approaching their end.
”
4 | 2018 GLOBAL INVESTMENT OUTLOOK
Multi-Sector Fixed Income Outlook
Constructive but Cautious for 2018
2018 OUTLOOK: “Against a backdrop of a generally healthy global economy, one could argue that many
fixed income sectors looked fully valued as of late 2017. However, we believe value can still be found in
an approach that moves past headlines and focuses on discrimination and underlying fundamentals.”
Global Growth Is Healthy but
Many Believe Fixed Income
Valuations Look Full
Our view of the coming year is informed by
the backdrop of a global economy that has
been performing quite well, particularly in
the United States. The consumer-led US
economy has continued to show strength
aided by continuing improvement in
employment and rising household wealth.
Moreover, consumer sentiment also has
indicated optimism over economic
Christopher J. Molumphy, CFA
prospects. Measures of corporate
wellbeing add to this picture, as revenue Chief Investment Officer
Franklin Templeton Fixed
and profitability growth suggest a generally
Income Group
steady outlook. And while we continue to
carefully observe the potential for political
developments in Europe to disrupt
economic growth, there has been an uptick
in economic activity in the region that While persistently high core inflation could Along with inflation, the Fed’s efforts to
bodes well for 2018. Overall, we are spur rates to climb faster than anticipated, reduce its balance sheet (even as it
reasonably optimistic that this backdrop we think the more likely scenario is a continues to hike short-term interest rates)
could remain intact over the coming year. modest uptick in inflation, particularly over also bear close watching. It is the first time
At the same time, we cannot ignore the the coming year. We believe inflation has anything of this scale has been attempted,
tremendous amount of liquidity that has been persistently low as a consequence of so care must be taken by policymakers not
been injected into the global financial several factors, primarily globalization and to unintentionally trigger an adverse
system during the last decade, nor the view technology. Globalization has made a vast reaction. While the Fed has just started this
of many market participants that fixed pool of labor available that has helped normalization process, the European
income markets appeared fully valued on a keep a lid on wage growth globally. At the Central Bank (ECB) has announced that it
number of traditional metrics as of late same time, improvements in technology will continue buying assets for a longer
2017. have resulted in the automation of various period than originally planned (albeit at a
traditionally manual tasks. While the pace reduced pace) while the Bank of Japan
Inflation, Monetary Policy and
of globalization may have slowed recently, (BOJ) has continued its QE program
an Aging Business Cycle Bear technology has not. If anything, further unabated. Nonetheless, we think the Fed
Watching advancements in artificial intelligence have and other central banks have done a
With this framework as a starting point,
made even some non-repetitive tasks and reasonably good job communicating their
there are a number of key issues that we
occupations additional candidates for intentions to market participants, although
believe will prove important in determining
disruption. We do not see these impacts we recognize they are still in the early
investment outcomes in 2018. Perhaps
easing materially over the near term, so stages of what promises to be a long
most important among these is inflation,
while core inflation may tick up, we think it campaign. For these reasons, we believe
given its status as a driver of Fed policy,
unlikely to increase in dramatic fashion that while interest rates are biased to rise,
interest rates and other key variables.
within this timeframe. they are likely to do so at a generally
measured pace over an extended period.
— Continued
2018 GLOBAL INVESTMENT OUTLOOK | 5
MULTI-SECTOR FIXED INCOME OUTLOOK
Global Central Banks Have Injected an Unprecedented Amount We also remain cognizant of the age of the
of Liquidity into Financial Markets current economic cycle. This cycle is
notable in the lack of excesses that
Global Liquidity: Total Assets of Major Central Banks
normally accompany a late stage cycle. For
August 2005–August 2017
USD Trillion
instance, we would expect somewhat
$20 higher levels of US inflation with
unemployment at current levels, or
somewhat higher levels of corporate
$16 leverage that could be interpreted as the
first indications of excess. Instead, while
we continue to believe that the cycle will
$12 end eventually, we have found little
evidence so far that is suggestive of broad-
based excess.
$8
A Time for Discrimination
Within specific sectors, corporate credit
continues to be an area bolstered by
$4 reasonable levels of growth and generally
healthy levels of cash flow. Though credit
spreads as of late 2017 were skewed
$0 toward the tighter side of their historical
8/05 8/08 8/11 8/14 8/17 averages, we would also note that these
Fed BOJ ECB People’s Bank of China
conditions could persist for some time. In
Source: Bloomberg. Dotted line shows approximate rate of increase prior to recession and approximate rate of increase past cycles, conditions permitting, spreads
post-recession. For illustrative and discussion purposes only. have managed to maintain such levels and
have even narrowed further. As a result,
Globalization and Technology Have Kept a Lid on US Inflation we believe reasonable risk-adjusted
opportunities remain in all corporate
Inflation – Secular Downtrend, Core Personal Consumption Expenditures (PCE)
January 1980–September 2017 sectors, including investment-grade and
YOY high-yield bonds as well as floating rate
10% bank loans. Historically, we would be
seeing some reflection of increasing credit
9%
risk this late in the economic cycle in
8% metrics like corporate leverage levels, debt
service coverage and credit quality. By and
7% large, however, while we have seen a
6%
slight pickup in some of these metrics, the
indicators we look at show little to incite
5% concern. Nonetheless, given the age of the
current cycle, credit quality remains an
4%
issue we will monitor closely and could
3% present a headwind were conditions to
meaningfully deteriorate.
2%
The housing-related sectors are another
1%
area where economic fundamentals have
0% remained generally supportive. They offer
1980 1982 1984 1987 1989 1991 1994 1996 1998 2001 2003 2005 2008 2010 2012 2015 2017 a broad set of opportunities from the
perspective of sectors, such as commercial
Recession Core PCE Cycle Average
and residential, as well as credit quality.
Source: FactSet, US Bureau of Economic Analysis. For illustrative and discussion purposes only.
Diversity also extends to each sector’s
— Continued
6 | 2018 GLOBAL INVESTMENT OUTLOOK
MULTI-SECTOR FIXED INCOME OUTLOOK
economic cycle, with certain ones more idiosyncratic while garnering the lion’s
notably mature than others. The range of share of headlines. Likewise, state
available investment opportunities provides
a broad variety of potentially attractive
assets, in our view.
governments and other municipal bond
market issuers in the United States have
done a generally solid job of managing
“ We believe it will be
important to
differentiate between
their liabilities. While there are always a
However, even a buoyant economy has
number of issuers that garner the bulk of sectors exposed to
winners and losers, and not all credits
headlines for their problems, they
within these asset classes will benefit some sort of
represent a very small percentage of
equally. As a result, we believe it will be
overall credits. In short, we believe moving fundamental
important to differentiate between sectors
exposed to some sort of fundamental
past headlines and focusing on the disruption, such as
underlying fundamentals is a sound
disruption, such as many retail-related
approach for identifying value in the current
many retail-related
names, versus those that may be
bond market climate. names, versus those
undergoing more cyclically dependent
shifts, such as many commodity-related Lessons Learned Since the that may be
credits. The former is an area that we Global Financial Crisis undergoing more
would strive to avoid absent more clarity, Ten years have passed since the global
while the latter may or may not represent
cyclically dependent
financial crisis began, and it seems
an opportunity. appropriate to mention a few thoughts. As shifts, such as many
When a sector an investment team, our emphasis has commodity-related
”
such as retail is always been on identifying where excesses
disrupted, the or bubbles are likely to arise and how they
credits.
knock-on effects might manifest themselves as problems in
could extend the global financial system. In retrospect,
past sector we think we did a good job of pinpointing
issuers to these issues in the run-up to the crisis and
service managed to steer clear of the major trouble
providers, such spots. As we cast a glance to the coming
as certain year, we continue to be concerned with
segments of the commercial mortgage- bubbles and excesses—no more so than
backed securities market. within certain areas of the sovereign debt
markets. Of all the distortions or bubble-like
The principle of discrimination extends to
conditions caused directly or indirectly by
other sectors where we think value can still
unconventional monetary policy, sovereign
be found, such as US municipal bonds and
bond markets exhibiting negative interest
emerging-market debt. Within emerging
rates would certainly be close to the top of
markets, we note that problem areas like
our list.
Venezuela remain localized and generally
2018 GLOBAL INVESTMENT OUTLOOK | 7
Global Equity Outlook
As the Era of Cheap Money Comes to an End, Non-US Markets Look Poised to
Stand Out in 2018
2018 OUTLOOK: “Despite robust global economic growth, we anticipate greater uncertainty in 2018 as
central bank policy begins to tighten. We see better opportunities outside the United States, with
emerging-market technology and consumer names particularly interesting areas.”
We expect 2018 to be a potentially pivotal After being narrowly driven by a few
year for global equity markets. The global countries like the United States and China,
economy should continue to hum along, we have seen the expansion broaden out,
with both developed and emerging markets with greater participation from Europe,
maintaining their momentum. However, we Japan and various emerging markets,
expect the era of cheap money will slowly suggesting to us that the cycle has further
draw to a close, bringing with it new to run. Still ample liquidity, potentially more
uncertainties. Global equity markets supportive fiscal policy in a number of
broadly appear to be pricing in significant major economies and easing lending
earnings growth, but we believe some conditions should all help underpin global
regions such as Europe and Asian growth over the course of the coming year.
emerging markets were more attractively Inflationary pressures have remained
valued than their US counterparts as of late subdued, but we think they should pick up
2017, making it increasingly important for as the recovery advances. Stephen H. Dover, CFA
investors to focus on individual company Head of Equities
With this more durable economic recovery
fundamentals. Franklin Templeton Investments
has come a simultaneous move by certain
A “Goldilocks” Macroeconomic central banks to begin to tighten monetary central banks need to begin to give
Scenario policy. We see two reasons for this. First, themselves greater leeway to act in the
The synchronized expansion we have seen economic conditions have improved in a future to provide stimulus should economic
around the world over the course of 2017 number of regions to the point that tighter growth weaken over the medium term.
looks set to continue unimpeded in 2018. policy is warranted. Second, we believe
With the recovery in the United States the
most entrenched, the Fed is already
Falling Market Correlations May Create More Individual
farthest down the path toward policy
Opportunities
normalization. We anticipate a gradual rise
One-Year Rolling Correlation in Weekly Price Change of 45 Markets against the MSCI All
in interest rates over the year, along with a
Country World Index
As of November 3, 2017 continued unwinding of the Fed’s massive
Average R-Squared balance sheet as the economic recovery
0.7 continues and the labor market remains
0.6 relatively tight. In Europe, policy is likely to
tighten more gradually as the recovery
0.5
builds steam and inflationary pressures
0.4 remain subdued.
0.3
Although the effects of these moves will
0.2 bear watching, we would point out that
central bank-driven liquidity remains
0.1
significant and should continue to buttress
0.0 global growth. The balance sheets at the
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
ECB and BOJ are bigger than the Fed’s as
Source: Calculations by Franklin Templeton’s Global Research Library using data sourced from FactSet and MSCI. R-
squared is a measurement of how closely the price change correlates with the performance of a benchmark index and is a a percentage of gross domestic product
measurement of what portion of its performance can be explained by the performance of the overall market or index. (GDP) and should continue to support
Values for r-squared range from 0 to 1, where 0 indicates no correlation and 1 indicates perfect correlation. Past
performance does not guarantee future results. global equities. So long as rate hikes and
— Continued
8 | 2018 GLOBAL INVESTMENT OUTLOOKGLOBAL EQUITY OUTLOOK
Emerging-Market Equity Valuations Have Risen, but Have Been consumption over government investment
Higher in the Past and India’s ongoing structural reform
Emerging Markets Relative to Developed Markets: Price-to-Earnings efforts may create conditions for continued
As of October 31, 2017 economic and corporate earnings growth
1.2 over both the short and longer terms.
1.1 Growth in Disruptive Companies
In this environment of modestly rising
1.0 interest rates and fuller valuations, we
believe innovative companies with the
0.9 potential to disrupt existing industries,
including in emerging markets, could fare
0.8 particularly well. We see opportunity not
only in disruptive technology companies,
0.7 but also in companies that are using
technology to change entire industries. And
0.6 unlike during past runs in technology
2007 2008 2010 2011 2012 2013 2014 2015 2016 2017 stocks, many of these companies have
Source: FactSet, MSCI. Emerging markets are represented by the MSCI Emerging Markets Index, and developed markets actual earnings and cash flows that can
are represented by the MSCI World Index. Past performance does not guarantee future results.
support reinvestment in their businesses,
which in turn makes them less reliant on
policy changes are gradual and well declined substantially, creating greater
raising capital in the markets at a time
communicated, we believe markets can opportunity to differentiate between
when interest rates are climbing.
take the moves in stride. Even emerging markets and focus on individual stock
markets need not necessarily fear tighter selection. Emerging markets are particularly
Fed policy and a potentially stronger US attractive to us in this regard. We are at a
In Europe, we expect earnings to recover
dollar so long as the dollar moves steadily. tipping point in many emerging markets
alongside a pickup in inflation over time.
We believe the positive economic forces where resources and exports are no longer
Modestly higher interest rates can benefit
currently present in the global economy will the primary drivers of growth and of the
earnings in the financials sector, while
remain strong enough to overcome the equity markets. Technology companies
rising commodity prices would tend to
potentially negative impact tighter policy now make up a sizable portion of
benefit energy and materials companies.
will have, but we could see some short- emerging-market stock markets, and these
We do remain somewhat cautious on the
term volatility as markets adjust. companies have the opportunity to
broader developed markets in general,
drastically improve economic productivity
Better Opportunities outside the however, as equities may be “priced to
through things like mobile banking that are
United States perfection”—any disappointment in
hard to replicate in developed economies.
Corporate earnings and relative valuations earnings or rapid increase in interest rates
The rising middle class should also
also to some degree have mirrored where could prove disruptive. In Europe and
continue to foster these trends. Emerging-
the major economies are in their recoveries Japan, equity valuations as of October
market consumers are not only demanding
as of November 2017. And we believe 2017 were still below their post-crisis peak
goods, but also services such as banking,
positive economic and earnings visibility in 2015, though close to their long-term
health care and entertainment.
has been behind equity market returns historical averages.
during 2017, a trend that can continue in These technological advances and rising
In Asia, we expect strong economic growth
2018 so long as earnings growth maintains consumption should also help reinforce the
in China and India to feed through to better
momentum. US earnings have recovered ongoing structural trends we are seeing in
corporate profits across the region.
strongly and are now past their prior peaks, China, India, Indonesia, the Philippines and
Already, we are seeing many emerging
but with corporate earnings beginning to elsewhere. As growth improves and access
markets trade more on corporate and
show increasing strength outside the to technology increases, we see the rise of
sector fundamentals than on broader
United States, we believe an opportunity urbanization and the burgeoning middle
macroeconomic trends, something we
exists for those stock markets to lead classes consuming more products, further
anticipate should continue in 2018.
global equities over the coming year. driving growth over the longer term.
Furthermore, China’s emphasis on
Additionally, market correlations have
2018 GLOBAL INVESTMENT OUTLOOK | 9Multi-Asset Investing Outlook
Optimism and Selectivity in 2018: Business Fundamentals in Focus as Stimulus
Fades from Financial Markets
2018 OUTLOOK: “We’re expecting a return to normal volatility in financial markets in 2018, the kind
that we think is best-suited to a nimble, tactical approach toward portfolio construction.”
We regard 2018 as a critical juncture for
global financial markets and economies.
Ten years on from the GFC of 2007–2009,
the response of key central banks to it—
namely the massive printing of money
through QE programs—has supported, in
broad terms, an environment of
synchronized global growth and resilient
corporate profitability. It has also
accomplished its goal of guiding many
investors into riskier financial assets. Stock
market gauges across developed and
emerging markets have recovered
significantly since the depths of the GFC; in
the United States, for example, we’ve
experienced the country’s second-longest
bull market on record, and bond markets Edward D. Perks, CFA
across the globe have likewise posted Chief Investment Officer
impressive gains. At the same time, the Franklin Templeton Multi-Asset Solutions
march higher in US and global equity
indexes has seen implied volatility fall to
multi-year—and in some cases multi-
decade—lows.
However, the and tactical approach to multi-asset accelerate marginally over the next couple
Fed is now investing is the best posture to navigate of years.
shifting toward a this uncertain outlook.
The extended period of generally low
monetary-
interest rates globally has also supported
tightening phase Synchronized Global Growth corporate profit margins that were still
as it gradually with Scope to Persist improving in late 2017. The sustainability of
raises interest After a slow-burning but sustained
corporate profits has been the foundation
rates and recovery, the global economy has largely
for rising global equity markets in 2017.
unwinds its repaired the damage of the GFC and the
Though US corporations have
balance sheet, ensuing recession. In October 2017, the
demonstrated a generally subdued
and certain other International Monetary Fund (IMF) lifted its
approach toward capital spending since the
central banks may likewise begin to do so forecasts for global growth and
GFC, we believe many companies are now
in the year ahead. We will see how the employment in 2017 and 2018. The IMF
more focused on positive capital allocation
extended influence of QE on financial expects all G20 countries2 to grow in
decision making and policies. The lack of
markets evolves as its gradual removal 2017—the first such synchronized
significant investment to date has likely
gathers strength. Various global political expansion since 2010. We believe the
dampened excesses that might contribute
situations also have the power to ratchet ongoing global economic recovery has the
to economic challenges, and an
up volatility. Overall, we face the coming potential to continue for a few more years
acceleration in business investment could
year with a balanced assessment of the at least. Global trade has picked up since
give economic growth a second wind by,
opportunities and potential headwinds, and the latter half of 2016, and it could
for example, reviving productivity growth.
this furthers our conviction that a nimble
— Continued
10 | 2018 GLOBAL INVESTMENT OUTLOOKMULTI-ASSET INVESTING OUTLOOK
Corporate Profit Resiliency amid Low Interest Rates of corporate profits. This, in turn, could
encourage US companies to reinvest more
Net Income Margins, United States and Worldwide of their profits domestically based on
January 1, 2005–November 1, 2017
favorable tax treatment of future earnings.
11%
It would also be supportive of higher future
US economic and earnings growth.
10% Elsewhere, the latest push for Catalonian
independence in Spain was a reminder that
Europe’s economic recovery is not
9% necessarily synonymous with political
tranquility, and thus faces potential future
disruption. Similarly, geopolitical outliers
8% such as North Korea could linger as a
source of uncertainty and headline risk.
With that in mind, we think investors should
7%
consider preparing for rising volatility
following an unusually quiet period for
global financial markets.
6%
We Think 2018 Calls for a
5% Selective Approach to Multi-
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Asset Investing
S&P 500 Index MSCI World Index Given that central bank monetary policy is
Source: Thomson Reuters Datastream. Indexes are unmanaged and one cannot invest directly in an index. They do not set to provide incrementally less support
reflect any fees, expenses or sales charges. Past performance does not guarantee future results.
for a wide range of risk assets as financial
markets evolve in 2018, we think this is a
Potential Return of Normal Any resurgence in market volatility could time to be agile in our portfolios and adapt
Volatility as Extraordinary also be driven by various geopolitical to changes that may be coming. For all of
Support Measures Are factors. The US political environment our multi-asset portfolios, their construction
Removed remains a challenge, and several of the begins with our longer-term capital market
This backdrop leads us to believe the pro-growth economic policies touted by the expectations. However, we also leverage
normalizing of monetary policy in 2018 current presidential administration have the knowledge and expertise that exists in
could mean a return to normal market been slow to develop. With tax policy the Franklin Templeton investment teams
volatility. Many investors seem to expect maneuvering alongside Fed balance-sheet to drive tactical moves.
that reversing QE will have little impact, if unwinding on the horizon, US equities may
become more prone to volatility and sector Based on the teams’ fundamental
any. We disagree, though we think the Fed
rotation. Nonetheless, we still see potential research, we believe our multi-asset
has signaled its policy intentions clearly
for eventual US corporate tax reform, portfolios will likely be best served by being
enough that a disorderly debt-market
which may smooth the way for repatriation tilted toward equities. We regard equities
decline similar to 2013’s “taper tantrum”
appears unlikely. However, we see greater
potential for volatility in 2018, simply as
markets adjust to an environment in which
business fundamentals look set to continue
powering up, monetary policy will begin
“ We think investors should consider preparing for
rising volatility following an unusually quiet
powering down, and fiscal policy and
economic growth could be increasingly
influential as they are taken off “standby”
period for global financial markets.
”
mode.
— Continued
2018 GLOBAL INVESTMENT OUTLOOK | 11MULTI-ASSET INVESTING OUTLOOK
Global Equity Market Volatility in 2017 Has Been Abnormally Low
MSCI World Index, Returns and Drawdowns
December 31, 1983–October 31, 2017
39%
40% 37%
31%
30% 27%
23% 24% 24%
21% 20%
19% 19% 18%
20% 14% 15% 16% 16%
14% 13% 13%
12%
10%
10% 8% 7% 5%
2% 3% 3%
0%
-3% -2%
-4%
-10% -5% -5% -5% -5% -6%
-8% -8% -8% -7% -7%
-9%
-7% -8% -7% -8% -8%
-10%
-12% -11% -12%-11% -12%
-14% -14% -13% -14%
-20% -17%
-19% -19%-18%
-21% -21%
-23% -21% -23%
-30% -28%
-31% -31%
-40%
-42%
-50%
-51%
-60%
1983 1986 1989 1992 1995 1998 2001 2004 2007 2010 2013 2017
2016
Calendar Year Return Largest Drawdown
Source: MSCI. A drawdown is the peak-to-trough decline during a specific period on the index. A drawdown is usually quoted as the percentage between the peak and the subsequent
trough. Those tracking the entity measure from the time a retrenchment begins to when it reaches a new high. Past performance does not guarantee future results.
as fairly attractive compared to more the performance potential of global equities central banks have pushed down financing
interest rate-sensitive asset classes, given going forward. Moreover, we believe rising costs for corporate borrowers who have
the potential for eventual higher interest rates globally should increase the raised money in the world’s bond markets.
rates and the risk this entails for fixed opportunity set for investors. While corporate credit conditions appeared
income markets. Heading into 2018, healthy as we headed toward 2018, we
In terms of fixed income, we remain
valuations appeared stretched in certain also think potential shifts in these markets
cautious regarding developed-market
pockets of the global equity markets but could cause problems for investors holding
government bonds and retain our bias
not in others, and we have continued to bonds that are more susceptible to price
toward short duration to help us navigate
find compelling ideas across sectors. In declines or defaults should credit
some of the risks of this market
particular, we are most interested in stocks conditions turn. Essentially, our efforts
environment. A combination of improving
that appear currently undervalued relative within fixed income markets are now more
growth and favorable fiscal policies in
to long-term business fundamentals. We tilted toward deemphasizing asset
select emerging markets—along with the
also favor stocks that offer some degree of allocation risk in favor of more idiosyncratic
prospect for higher yields—presents
counter-cyclical or contrarian defensive risk exposures, with targeted and
opportunity in both hard currency and local
characteristics should the central bank- concentrated exposures to specific
currency emerging-market debt. Ultralow
fueled bull market eventually run out of government and corporate bond
interest rates and massive bond-buying by
steam. In our view, corporate earnings and opportunities.
cash flow generation will matter most for
12 | 2018 GLOBAL INVESTMENT OUTLOOKLong-Term Capital Markets Outlook
LONG-TERM OUTLOOK: “We expect long-term performance potential for numerous asset classes to
be positive but subdued. High levels of policy uncertainty and regional divergences will cause higher
dispersion across and within asset classes, in our opinion. Additionally, the generally low financial
market volatility level during 2017 is unlikely to persist. Over the five to 10-year timeframe of our
analysis, we favor global equities, particularly those in emerging markets.”
LONG-TERM CAPITAL MARKET EXPECTATIONS
Every year, a quantitative group within Franklin Templeton Multi-Asset Solutions
reviews the data and themes driving capital markets in order to build asset return
expectations for different asset classes for the next five to 10 years. Our long-
term forecasts are based on our assessment of current valuation measures,
economic growth and inflation prospects, as well as historical risk premiums. The
text that follows summarizes our 2018 capital market expectations.
Analysis: Global Growth Has The reform agenda in the European Union Chandra Seethamraju, Ph.D.
Improved and Inflation Is Likely has been slow and at times painful, but
Senior Vice President
to Remain Subdued progress has been made since the Franklin SystematiQ
The global economy has experienced eurozone sovereign debt crisis. The Franklin Templeton Multi-Asset Solutions
slower growth than was the historical leading role that Europe now holds among
pattern before the 2007–2009 global developed economies, in terms of
prospective growth, is at least in part due also important, as aging populations add to
financial crisis. Productivity growth has
to the greater stability that these reforms excess savings while keeping interest rates
been slower and uncertainties have
have encouraged. The 2017 election of low and inflation moderate. We intend to
remained high, but activity is picking up in
Emmanuel Macron as president of France closely monitor nominal wage growth to
many regions of the world, assisted by
adds to the prospect of further progress see if any pickup in it can help boost
reform measures.
toward reforms. inflation.
We live in an “Age of Reforms,” which in
many cases have already supported “Abenomics”—the economic policies of View #1: We Favor Global
stronger activity and in others promise Japanese Prime Minister Shinzo Abe—is Equities over Global Bonds
improving global growth, in our already in the category of “proven to have We believe global stocks have greater
assessment. helped.” Ongoing structural reforms in performance potential than global bonds,
emerging markets generally, and over the next five to 10 years, in an
specifically in China, appear to be making environment of reform measures,
“
good progress, which we see as a big plus
All reforms face improving global growth and moderate
for global growth. inflation.
criticism and doubt at
Globally, inflation has been persistently
the beginning. But in below-target and the outlook is mixed, as
Equity markets have appreciated sharply in
recent years, and valuations, based on
the end, they all tend wage growth has disappointed consensus price-to-earnings ratios, in developed
to help the economy. expectations given the employment growth markets were not cheap relative to their
seen in many economies. Many factors are historical averages as of late 2017.
We expect this trend holding back wage gains, not least being However, we believe equities can continue
to continue.
” the impact of globalized markets.
Technological advances such as artificial
intelligence and demographic factors are
to trade at significantly higher multiples
than was the case in the 1970s and 1980s.
The relative balance of power remains with
— Continued
2018 GLOBAL INVESTMENT OUTLOOK | 13LONG-TERM CAPITAL MARKETS OUTLOOK
global corporations, and the weakness of dependence on the United States as a track. The “demographic time-bomb” of
labor’s bargaining power supports the profit trading partner and higher currency aging populations is likely to hold down
share of GDP. In our analysis, it is earnings reserves have improved their fiscal yields and limit the growth that supports
growth that supports the outlook for stocks. flexibility. As a result, more countries can stock prices. Intergenerational stresses
issue local-currency denominated bonds, may be compounded by social imbalances,
Global bonds are vulnerable due to low
rather than be dependent on “hard- a middle-income wealth squeeze and the
current yields, depressed term premia3 and
currency” debt. It has also brought greater rise of populism.
the desire of developed-market central
freedom to their monetary policies, with no
banks to unwind unconventional policies.
Demographics and subdued productivity
need to move in lockstep with the Fed. Risk Considerations and
growth will likely keep yields low. Despite
Conclusion
this, current depressed yields provide a
View #2: We Favor Emerging A rising rate cycle and uncertainty about
limited cushion for even modest interest-
Markets over Developed reform measures pose risks to economic
rate increases. Markets growth and financial markets. However,
In both stocks and bonds, we believe the investors appeared well aware of these
performance potential in emerging markets threats and positioned cautiously in late
Analysis: Emerging Markets 2017. Stock valuations will need to be
will exceed that of developed markets over
Have Recovered and Become the next five to 10 years. watched closely in the medium term as we
More Resilient remain vigilant against a buildup of
Emerging economies have demonstrated a Emerging markets’ higher productivity financial stability risks.
much higher growth potential, notably in growth rates are likely to persist.
China and India, and their share of global Conventional monetary policy appears to Going forward, we expect long-term
GDP has increased consistently since be controlling inflation. Over the longer performance potential for numerous asset
2009. Although their growth rates have term, we expect increasing productivity classes to be positive but subdued. High
slowed, their share of GDP has continued should also result in a broad appreciation levels of policy uncertainty and regional
to increase and the importance of these in emerging-market currencies. Such divergences will cause higher dispersion
countries to the pace of global growth has trends support the return potential of across and within asset classes, in our
also increased. unhedged positions to both stocks and opinion, which increases the attractiveness
bonds in emerging markets and may drive of active management in both asset
Fortunately, as the importance of the allocation and at the security-selection
asset flows into these investments.
emerging-market economies has level. The generally low financial market
increased, so the stability of these In contrast, the pressures on developed volatility level during 2017 is unlikely to
countries has improved. Enhanced economies remain acute. Even with persist. Given our subdued return
macroeconomic self-control, increased unorthodox monetary policy, the developed expectation, we would not be surprised to
domestic consumption, reduced world is struggling to bring inflation back on see volatility rebound down the road.
Growing Importance of Emerging-Market Growth
Relative Nominal GDP of G7 and BRIC Economies
2009 2016 2027 (OECD Forecast)
BRIC….38% BRIC…..45% BRIC…..51%
G7…….62% G7….….55% G7……..49%
Source: Organisation for Economic Co-operation and Development (OECD), FTMAS. The G7 comprises seven countries: Canada, France, Germany, Italy, Japan, the United Kingdom
and the United States. BRIC countries are Brazil, Russia, India and China. Forecast as of 6/30/17. There is no assurance that any forecast will be realized.
14 | 2018 GLOBAL INVESTMENT OUTLOOKGO ONLINE TO FIND >
MORE INVESTMENT INSIGHTS
Visit our website to learn more about how our multiple world-class
investment teams view the complex, interconnected global financial
markets they invest in. The portfolio managers listed below describe
what they foresee as investment opportunities in 2018. Read more at
franklintempleton.com/outlook2018.
FIXED INCOME
US Municipal Bond Investing European Fixed Income Investing
Sheila Amoroso & Rafael Costas David Zahn, CFA, FRM
Franklin Templeton Fixed Income Group Franklin Templeton Fixed Income Group
Global Fixed Income Investing
John W. Beck
Franklin Templeton Fixed Income Group
EQUITY
Global Value Investing Sector Investing: Biotech European Equity Investing
Norman J. Boersma, CFA, Heather Evan McCulloch, CFA Dylan Ball, ACA
Arnold, CFA & Tony Docal, CFA Franklin Equity Group Templeton Global Equity Group
Templeton Global Equity Group
Sector Investing: Technology Emerging Markets Equity
Global Value Investing Jonathan Curtis Investing
Peter A. Langerman & Franklin Equity Group Carlos Hardenberg &
Christian Correa, CFA Chetan Sehgal, CFA
Franklin Mutual Series Templeton Emerging Markets Group
US Growth Investing
Grant Bowers & Matthew J. Moberg, CPA
Franklin Equity Group
MULTI ASSETS
Managing Volatility through Portfolio Construction
Thomas A. Nelson, CFA
Franklin Templeton Multi-Asset Solutions
ALTERNATIVES
Hedge Fund Strategy Investing Real Estate and
David C. Saunders, Brooks Ritchey & Infrastructure Investing
Robert Christian Wilson Magee
K2 Advisors Franklin Real Asset Advisors
2018 GLOBAL INVESTMENT OUTLOOK | 15IMPORTANT LEGAL INFORMATION Dubai Financial Services Authority. Dubai office: Franklin Templeton
This material is intended to be of general interest only and should Investments, The Gate, East Wing, Level 2, Dubai International Financial
not be construed as individual investment advice or a Centre, P.O. Box 506613, Dubai, U.A.E., Tel.: +9714-4284100
recommendation or solicitation to buy, sell or hold any security or Fax:+9714-4284140. France: Issued by Franklin Templeton France S.A.,
to adopt any investment strategy. It does not constitute legal or 20 rue de la Paix, 75002 Paris, France. Hong Kong: Issued by Franklin
tax advice. Templeton Investments (Asia) Limited, 17/F, Chater House, 8 Connaught
Road Central, Hong Kong. Italy: Issued by Franklin Templeton
The views expressed are those of the investment manager and International Services S.à.r.l. – Italian Branch, Corso Italia, 1 – Milan,
the comments, opinions and analyses are rendered as of 20122, Italy. Japan: Issued by Franklin Templeton Investments Japan
publication date and may change without notice. The information Limited. Korea: Issued by Franklin Templeton Investment Trust
provided in this material is not intended as a complete analysis of Management Co., Ltd., 3rd fl., CCMM Building, 12 Youido-Dong,
every material fact regarding any country, region or market. All Youngdungpo-Gu, Seoul, Korea 150-968. Luxembourg/Benelux: Issued
investments involve risks, including possible loss of by Franklin Templeton International Services S.à r.l. – Supervised by the
principal. Commission de Surveillance du Secteur Financier - 8A, rue Albert
Data from third party sources may have been used in the Borschette, L-1246 Luxembourg - Tel: +352-46 66 67-1 - Fax: +352-46
preparation of this material and Franklin Templeton Investments 66 76. Malaysia: Issued by Franklin Templeton Asset Management
(“FTI”) has not independently verified, validated or audited such (Malaysia) Sdn. Bhd. & Franklin Templeton GSC Asset Management
data. FTI accepts no liability whatsoever for any loss arising from Sdn. Bhd. Poland: Issued by Templeton Asset Management (Poland) TFI
use of this information and reliance upon the comments opinions S.A., Rondo ONZ 1; 00-124 Warsaw. Romania: Issued by the Bucharest
and analyses in the material is at the sole discretion of the user. branch of Franklin Templeton Investment Management Limited, 78-80
Buzesti Street, Premium Point, 7th-8th Floor, 011017 Bucharest 1,
Products, services and information may not be available in all Romania. Registered with Romania Financial Supervisory Authority under
jurisdictions and are offered outside the U.S. by other FTI affiliates no. PJM01SFIM/400005/14.09.2009, authorized and regulated in the UK
and/or their distributors as local laws and regulation permits. by the Financial Conduct Authority. Singapore: Issued by Templeton
Please consult your own professional adviser for further Asset Management Ltd. Registration No. (UEN) 199205211E. 7 Temasek
information on availability of products and services in your Boulevard, #38-03 Suntec Tower One, 038987, Singapore. Spain: Issued
jurisdiction. by the branch of Franklin Templeton Investment Management,
Issued in the U.S. by Franklin Templeton Distributors, Inc., One Professional of the Financial Sector under the Supervision of CNMV,
Franklin Parkway, San Mateo, California 94403-1906, (800) DIAL José Ortega y Gasset 29, Madrid. South Africa: Issued by Franklin
BEN/342-5236, franklintempleton.com - Franklin Templeton Templeton Investments SA (PTY) Ltd which is an authorised Financial
Distributors, Inc. is the principal distributor of Franklin Templeton Services Provider. Tel: +27 (21) 831 7400 Fax: +27 (21) 831 7422.
Investments’ U.S. registered products, which are available only in Switzerland: Issued by Franklin Templeton Switzerland Ltd,
jurisdictions where an offer or solicitation of such products is Stockerstrasse 38, CH-8002 Zurich. UK: Issued by Franklin Templeton
permitted under applicable laws and regulation. Investment Management Limited (FTIML), registered office: Cannon
Place, 78 Cannon Street, London EC4N 6HL. Authorized and regulated
Investors should carefully consider a fund’s investment goals, in the United Kingdom by the Financial Conduct Authority. Nordic
risks, sales charges and expenses before investing. To obtain a regions: Issued by Franklin Templeton Investment Management Limited
summary prospectus and/or prospectus, which contains this and (FTIML), Swedish Branch, Blasieholmsgatan 5, SE-111 48 Stockholm,
other information, talk to your financial advisor, call us at (800) Sweden. Phone: +46 (0) 8 545 01230, Fax: +46 (0) 8 545 01239. FTIML
DIAL BEN®/342-5236 or visit franklintempleton.com. Please is authorised and regulated in the United Kingdom by the Financial
carefully read a prospectus before you invest or send money. Conduct Authority and is authorized to conduct certain investment
services in Denmark, in Sweden, in Norway and in Finland. Offshore
Australia: Issued by Franklin Templeton Investments Australia Limited
Americas: In the U.S., this publication is made available only to financial
(ABN 87 006 972 247) (Australian Financial Services License Holder No.
intermediaries by Templeton/Franklin Investment Services, 100 Fountain
225328), Level 19, 101 Collins Street, Melbourne, Victoria, 3000.
Parkway, St. Petersburg, Florida 33716. Tel: (800) 239-3894 (USA Toll-
Austria/Germany: Issued by Franklin Templeton Investment Services
Free), (877) 389-0076 (Canada Toll-Free), and Fax: (727) 299-8736.
GmbH, Mainzer Landstraße 16, D-60325 Frankfurt am Main, Germany.
Investments are not FDIC insured; may lose value; and are not bank
Authorized in Germany by IHK Frankfurt M., Reg. no. D-F-125-TMX1-08.
guaranteed. Distribution outside the U.S. may be made by Templeton
Canada: Issued by Franklin Templeton Investments Corp., 5000 Yonge
Global Advisors Limited or other sub-distributors, intermediaries, dealers
Street, Suite 900 Toronto, ON, M2N 0A7, Fax: (416) 364-1163, (800)
or professional investors that have been engaged by Templeton Global
387-0830, www.franklintempleton.ca. In Canada, FT Multi-Asset Solutions
Advisors Limited to distribute shares of Franklin Templeton funds in
is part of Fiduciary Trust Company of Canada, a wholly owned subsidiary
certain jurisdictions. This is not an offer to sell or a solicitation of an offer
of Franklin Templeton Investments Corp. Dubai: Issued by Franklin
to purchase securities in any jurisdiction where it would be illegal to do so.
Templeton Investments (ME) Limited, authorized and regulated by the
CFA® and Chartered Financial Analyst® are trademarks owned by CFA Institute.
1. Money velocity measures the rate at which money is circulated through an economy.
2. The G20 (Group of 20) is an international forum for the governments and central bank governors from Argentina, Australia, Brazil, Canada, China, France, Germany, India, Indonesia,
Italy, Japan, Mexico, the Russian Federation, Saudi Arabia, South Africa, South Korea, Turkey, the United Kingdom, the United States and the European Union.
3. Term premia refer to the extra return buyers of bonds demand to hold longer-term securities instead of investing in a series of short-term issues.
MSCI makes no warranties and shall have no liability with respect to any MSCI data reproduced herein. No further redistribution or use is permitted. This report is not prepared or
endorsed by MSCI.
Important data provider notices and terms available at www.franklintempletondatasources.com.
16 | 2018 GLOBAL INVESTMENT OUTLOOKYou can also read
