Beyond Bulls & Bears

Is a Global Slow-Down in the Works?

Mounting sovereign debt crises combined with a slowing U.S. and European recoveries have created the potential for a perfect economic storm. As policymakers scramble to act, many investors are seeking shelter. But, are we on the brink of another recession?  Michael Hasenstab, Co-Director of the International Bond Department at the Franklin Templeton Fixed Income Group, doesn’t believe so:

Michael Hasenstab
Michael Hasenstab

“We continue to believe the recovery remains on track in most economies and expect that emerging markets should continue leading an uneven global recovery…Importantly, we do not currently anticipate a new recession in the U.S. The subpar growth we do expect could be sufficient to continue supporting economic activity in Asia and other emerging markets. We expect some moderation in the growth trajectory of these economies but would view that as a welcome development, since it could allow growth to be sustained over a longer period, reducing the potential for overheating.”

This continued growth in emerging markets can not only help sustain the global economic recovery, but also provide opportunities for some investors, says Dr. Mark Mobius, Executive Chairman of the Templeton Emerging Markets Group:

             “In particular, we believe certain currencies and stocks of emerging countries look relatively attractive given that (1) emerging markets generally have more foreign reserves than developed countries, and (2) the debt-to-GDP (gross domestic product) levels of several emerging countries currently tend to be lower than those of many developed countries. Emerging markets’ overall improved fiscal health is one of the reasons we believe emerging-market currencies have been so strong recently, and they may continue to appreciate going forward.”

Gary Motyl
Gary Motyl

Still, some investors examining the global investment marketplace may be tempted to seek solid shores rather than ride out the rough water. Deep plunges in recent equity trading sessions can make for investing nausea.  Yet, during the broad market selloffs, some stocks with solid underlying fundamentals actually present a better buying opportunity. Gary Motyl, C.I.O. of the Templeton Global Equity Group, reminds us that as market conditions whip-saw in the days to come, it’s more important than ever to remember the fundamentals of value investing for the long-term:

             “Unfortunately in periods like this, when markets are this tumultuous –when there’s this degree of selling – all stocks, even stocks that have great value characteristics go down as well…John Templeton always stressed discipline and patience and this is one of those times, in our view, it’s absolutely the correct path to take.” 
 
Until next time, Beyond Bulls & Bears leaves you with a quote from the late Sir John Templeton,
 

             “To buy when others are despondently selling and to sell when others are avidly buying requires the greatest fortitude and pays the greatest ultimate rewards.”

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