The financial markets may have let out a collective sigh of relief on January 1 when U.S. politicians managed to avoid falling off the fiscal cliff, but the fact is the fundamental issue plaguing the U.S. still hasn’t been addressed – mounting debt. As a result, Dr. Michael Hasenstab, co-director of the International Bond Department, says he simply doesn’t see much value in U.S. Treasuries right now. He does see it elsewhere in the world, though, including Ireland and select emerging markets where fiscal houses appear in much better order. Read more…
One would hope that after the United States avoided going over the fiscal cliff there might be some calm in the financial markets, but the forecast still calls for potential choppiness ahead with a good chance of uncertainty because there are fiscal loose ends that still need to be tied up. The U.S. Congress and the Obama administration have addressed the tax side of the equation, but delayed making the tough decisions on the spending side which are also needed if they are to have a fighting chance at tackling the nation’s mounting deficit. And of course, the U.S. still hasn’t closed the debate on the debt ceiling, which could result in another market storm. Read more…
We wrap up our 2013 Vantage Point series with commentary from Stephen Dover, CFA, international chief investment officer, Local Asset Management. He provides an on-the-ground perspective of equity and fixed income challenges and opportunities in developed and emerging markets as he and his team see it.
Local Asset Management
Stephen Dover, CFA, International Chief Investment Officer
By the end of 2012, forward economic indicators were beginning to reflect more positive global growth potential in the coming quarters, particularly for emerging markets and certain major developed economies. We think the recovery in developed markets is set to remain somewhat muted, however, due to the ongoing deleveraging cycle, fiscal restraint and persistent pressure on sovereign debt markets. Read more…
Today, three Franklin Equity Group portfolio managers who offer their insights on the natural resources sector: Frederick Fromm, CFA, portfolio manager and senior security analyst; Steve Land, CFA, portfolio manager and research analyst, and Matthew Adams, CFA, portfolio manager and research analyst.
FRANKLIN EQUITY GROUP®
Frederick Fromm, CFA, Portfolio Manager and Senior Security Analyst
Steve Land, CFA, Portfolio Manager and Research Analyst
Matthew Adams, CFA, Portfolio Manager and Research Analyst
The environment in 2012 was rife with economic and political cross-currents that can divert investors’ attention away from long-term goals and investment strategies. During times like these, we believe it is important to refocus on what can make natural resources attractive as an asset class. Global consumption increases driven by a combination of world population growth and per-capita consumption trends are likely to continue, in our view, driving demand for commodities longer term. However, over time, we believe it is inevitable that we are likely to experience periods of slowing economic expansion and consumption growth, which should not be mistaken for a long-term shift. Large portions of the world’s population still consume far less than those living in the developed world, and it is likely they will continue to aspire to higher standards of living, in our view. As consumption grows, we believe certain commodities are likely to face supply constraints and robust pricing dynamics, and though fundamental supply and demand trends could shift over time, we expect many companies could benefit from the potentially robust fundamental environments.Given what we see as a likely positive long-term backdrop, short-term periods of market weakness can and, we believe, should be viewed as potential investment opportunities. Although select sub-industries within the natural resources sector have performed well over the past year, most have languished in an environment that has favored dividend-paying stocks. We cannot predict the duration of such periods, but history has shown us that market shifts like the one we have been experiencing do not last forever, and we are therefore optimistic for the long-term potential of the investment opportunities we have been finding.
In our next Vanage Point blog, Edward Jamieson, president, chief investment officer and portfolio manager of Franklin Equity Group, shares his perspective on the bright (and not-so-bright) spots in the U.S. economy, and the potential opportunities he sees for U.S. equity investors in the year ahead.
FRANKLIN EQUITY GROUP®
Edward B. Jamieson, President, Chief Investment Officer and Portfolio Manager
Equity markets in the U.S. performed very well during 2012, in our view, despite continued uncertainty. Most major indexes posted double-digit returns through November, and volatility during most of the year was noticeably lower than in 2011. A number of factors, including the European debt crisis, slower emerging-market growth, and the election along with fiscal issues in the U.S. weighed on the markets at times, but none of these factors were enough to derail what has been the slow-but-steady growth of the U.S. economy. Corporate earnings growth decelerated, but the overall level of earnings pushed into record territory, and companies generally continued to use their strong free cash flow for shareholder-friendly activities such as share repurchases and dividend increases. High dividend-paying stocks did particularly well as many investors looked to companies that generated yield in an extremely low interest rate environment.
For a global perspective on the challenges facing the equity markets at large—and the potential values to be had as a result, we turn to Peter Langerman, chairman, president and chief executive officer of Mutual Series®.
Peter A. Langerman, Chairman, President and Chief Executive Officer
In 2013, we expect investors to face ongoing uncertainty about the strength of the U.S. economic recovery, resolution of the eurozone debt crisis and the pace of Asian growth. In our view, U.S. investors and businesses will likely continue to wait for more clarity on U.S. fiscal policy as well as the Fed’s quantitative easing programs. We expect further progress will be made toward the construction of a European solution to the sovereign debt crisis but recognize that the process is complex, cumbersome and seems to require market pressure to force progress. In Asia, we continue to watch China closely given the potential global ramifications of the country’s slower economic growth and leadership transition.
For a view on the global fixed income market and potential opportunities therein, we turn to Christopher Molumphy, CFA, chief investment officer of Franklin Templeton Fixed Income Group.
FRANKLIN TEMPLETON FIXED INCOME GROUP®
Christopher J. Molumphy, CFA, Chief Investment Officer
We entered 2012 cautiously optimistic about U.S. economic growth even though the U.S. economy experienced stagnant wage levels and stubborn unemployment levels coupled with struggling residential housing and commercial real estate markets. Given the severe recession, combined with the financial crisis, from which the U.S. has been recovering, expectations for growth both today and going forward continue to be appropriately muted. Read more…
For the next installment of our “New Year’s Vantage Point” blog series, today we hear from Mark Mobius, executive chairman of Templeton Emerging Markets Group.
TEMPLETON EMERGING MARKETS GROUP
Mark Mobius, Ph.D., Executive Chairman
We are generally positive on the long-term prospects for emerging and frontier market equities. In our opinion, the economic background for many emerging and frontier markets is stronger than that prevailing in many developed markets. Although estimates for emerging-market economic growth in 2012 have fallen in recent months, they generally remain well in excess of those for developed markets. Moreover, unlike developed markets, many emerging and frontier markets still have ample room for fiscal and monetary stimulus. Although weak growth in developed markets could be transmitted to emerging markets, notably through declines in world trade, this influence could continue to be offset in emerging markets by higher investment spending and increased domestic demand. Read more…
As we ring in a new year, it’s a good time to gain some perspective on where we’ve been, and where we might be headed. Norm Boersma, CFA, chief investment officer of Templeton Global Equity Group, takes a look at the current headwinds facing the global equity markets, from fiscal imbalances to growth challenges—and how market uncertainty can result in market mispricings. Read more…
As we ring in a new year, it’s a good time to gain some perspective on where we’ve been, and where we might be headed. In the first few weeks of January, Beyond Bulls & Bears will be featuring a series of investment commentaries from select Franklin Templeton investment management teams. These professionals provide their insights on the market ups and downs of 2012, and the potential challenges and opportunities that may lie ahead from their respective vantage points. Today we hear from Michael Hasenstab, portfolio manager and co-director of the International Bond Department. Read more…