Inaugural Franklin Templeton Institute Global Investment Management Survey Uncovers Predictions on Interest Rates, Inflation, Equity Market Growth and More
According to the inaugural Franklin Templeton Institute Global Investment Management Survey, the U.S. Federal Reserve will deliver four interest rate cuts this year, in line with the four cuts predicted by the futures market and one more than the three cuts projected by the Fed's own "dot plot." As a result, the 30-year mortgage rate is projected to fall from nearly 6.7% to roughly 5.6% by the end of 2024.
The survey results, revealed today by Franklin Templeton, encompass the views of 300 of its senior investment professionals from different teams around the world with unique knowledge, processes and perspectives. They span the breadth of Franklin Templeton, covering public and private equity, public and private debt, real estate, digital assets, hedge funds and secondary private market investments.
"Driven by the collective wisdom of Franklin Templeton's worldwide investment teams, the survey ? which is one of the largest of its kind ? is a starting point in sharing our views on the economy, equities, fixed income and alternatives," said Stephen Dover, Chief Market Strategist and Head of the Franklin Templeton Institute. "It aggregates the best thinking of our diverse line-up of specialist investment managers with deep expertise in their domains to help our clients navigate the markets and solve complex issues."
The complete survey results can be found here.
Additional Predictions from Survey's Four Focus Areas
The economy: A global recession should be avoided
- Franklin Templeton's investment professionals expect to see four interest rate cuts in 2024, in line with the futures market, but more than the Fed's latest dot plot, which is projecting three cuts in 2024. This will lead to the federal funds rate ending the year at 4.30%, while the Fed dot plot shows 4.63%.
- Global growth will be slower than consensus expectations across major regions, and noticeably weaker in Europe and China.
- Inflation will continue to moderate, but at a slower pace than consensus, and will remain above central bank targets.
Equities: Flat for the year
- The S&P 500 Index will end the year at 4744, essentially flat from where it was at the beginning of the year.
- There will be 5.8% earnings growth in the U.S., significantly lower than the 9.7% expected by the market.
- Value stocks look more promising than growth stocks, and U.S. and emerging markets should be preferred over non-U.S. developed markets.
Fixed income: Driven by Fed policy, geopolitics and recession
- Two-year Treasury yields will likely decline meaningfully while 10-year yields are expected to move only modestly lower.
- Municipal bonds will continue to be a high quality, diversifying investment option with attractive tax-free yields.
- The market should favor investment grade debt due to its higher credit quality as default rates for high yield debt continue to tick higher toward their historical average.
Alternatives: Despite headlines, real estate offers interesting opportunities
- Commercial real estate presents some interesting opportunities within sectors like industrials, multifamily and life sciences; still, challenges in the office sector will persist.
- Private credit managers have filled the void created by traditional lenders, and they're able to negotiate favorable terms within sectors like industrials, multifamily and life sciences.
- Secondary investments provide diversification across vintages, geography, industry and types of private equity.
- Within the hedge fund space, macro and market neutral strategies look attractive given elevated geopolitical risks.
The survey provides a comprehensive summation of the views of 300 of Franklin Templeton's investment professionals who focus on both public and private markets across asset classes. The specific forecasts within the survey reflect the average of the group; each investment team operates independently and has its own views.
Launched in January 2021, the Franklin Templeton Institute is an innovative hub for research and knowledge sharing that unlocks the firm's competitive advantage as a source of global market insights.
The views expressed are those of the investment manager and the comments, opinions and analyses are rendered as of the publication date and may change without notice. The underlying assumptions and these views are subject to change based on market and other conditions and may differ from other portfolio managers or of the firm as a whole. The information provided in this material is not intended as a complete analysis of every material fact regarding any country, region or market. There is no assurance that any prediction, projection or forecast on the economy, stock market, bond market or the economic trends of the markets will be realized. The value of investments and the income from them can go down as well as up and you may not get back the full amount that you invested. Past performance is not necessarily indicative nor a guarantee of future performance. All investments involve risks, including possible loss of principal.
About Franklin Templeton
Franklin Resources, Inc. [NYSE:BEN] is a global investment management organization with subsidiaries operating as Franklin Templeton and serving clients in over 150 countries. Franklin Templeton's mission is to help clients achieve better outcomes through investment management expertise, wealth management and technology solutions. Through its specialist investment managers, the company offers specialization on a global scale, bringing extensive capabilities in fixed income, equity, alternatives and multi-asset solutions. With more than 1,400 investment professionals, and offices in major financial markets around the world, the California-based company has over 75 years of investment experience and approximately $1.6 trillion in assets under management as of January 31, 2024. For more information, please visit franklintempleton.com and follow us on LinkedIn, Twitter and Facebook.
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