Beyond Bulls & Bears

Perspectives

Quick thoughts: Investing for the next decade

Franklin Templeton recently hosted an investment forum in Singapore, and much of the dialog pointed to a growing gap in growth outlook emerging between Asia and the West. Stephen Dover shares some key takeaways from the forum.

Franklin Templeton recently hosted an investment forum in Singapore, and much of the dialog pointed to a growing gap in growth outlook emerging between Asia and the West. Given this, we believe the case for active management across asset classes has become more necessary, given the many macro, geopolitical and market related headwinds. Here are some of my key takeaways:

  • Fixed income has become more compelling as higher yields allow the asset class to resume its core role as an income producer without excess volatility. As expectations for 2023 US policy rates are approaching 5.25%, the potential for a prolonged period of elevated rates is rising.
  • Within equities, we think it’s key to focus on companies with strong balance sheets that can better defend against rising interest rates. Those that have better visibility into their supply chains will be more likely to deliver earnings in an inflationary environment.
  • Over the past 10 years, the profitability of the tech sector has risen dramatically. Today, investors can get exposure to a good structural growth story with businesses that have strong balance sheets and reliable recurring revenue streams.
  • The use of alternative assets is growing as the democratization of access continues. A trend of investing in partnership interests of companies already backed by private equity allows investors exposure to the asset class while reducing the risk of exposure to the early stage of a company’s life cycle.
  • The threat of reduced food security will have wide-ranging implications across the global economy. Solutions will require localizing supply chains to boost resilience, diversifying food sources and adopting new technologies like regenerative agriculture and aquaculture.
  • In terms of environmental, social and governance factors, regulators around the world are increasingly focused on addressing greenwashing, particularly by better categorization of funds and enhanced disclosure requirements.

Returning toward traditional mixes between stocks and bonds may become more favored in the current economic climate. This provides a wider opportunity set that could include assets as varied as US municipal bonds, equity/private equity investments in companies focused on healthcare and education, and/or corporate bonds in South Korea and Hong Kong.

WHAT ARE THE RISKS?

All investments involve risks, including the possible loss of principal. The value of investments can go down as well as up, and investors may not get back the full amount invested. Stock prices fluctuate, sometimes rapidly and dramatically, due to factors affecting individual companies, particular industries or sectors, or general market conditions. Bond prices generally move in the opposite direction of interest rates. Thus, as prices of bonds in an investment portfolio adjust to a rise in interest rates, the value of the portfolio may decline. Special risks are associated with foreign investing, including currency fluctuations, economic instability and political developments. Investments in emerging markets involve heightened risks related to the same factors, in addition to those associated with these markets’ smaller size and lesser liquidity. To the extent a strategy focuses on particular countries, regions, industries, sectors or types of investment from time to time, it may be subject to greater risks of adverse developments in such areas of focus than a strategy that invests in a wider variety of countries, regions, industries, sectors or investments.

Private equity investments involve a high degree of risk and is suitable only for investors who can afford to risk the loss of all or substantially all of such investment. Private equity investments may hold illiquid investments and its performance may be volatile. There can be no assurance that any investment will be adequately compensated for risks taken. A loss of an investor’s entire investment is possible. The timing of profit realization, if any, is highly uncertain.

The information provided is not a recommendation or individual investment advice for any particular security, strategy, or investment product and is not an indication of the trading intent of any Franklin Templeton managed portfolio. Franklin Templeton and our Specialist Investment Managers have certain environmental, sustainability and governance (ESG) goals or capabili­ties; however, not all strategies are managed to “ESG” oriented objectives.

IMPORTANT LEGAL INFORMATION

This material is intended to be of general interest only and should not be construed as individual investment advice or a recommendation or solicitation to buy, sell or hold any security or to adopt any investment strategy. It does not constitute legal or tax advice. This material may not be reproduced, distributed or published without prior written permission from Franklin Templeton.

The views expressed are those of the investment manager and the comments, opinions and analyses are rendered as at 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.

Any research and analysis contained in this material has been procured by Franklin Templeton for its own purposes and may be acted upon in that connection and, as such, is provided to you incidentally. Data from third party sources may have been used in the preparation of this material and Franklin Templeton (“FT”) has not independently verified, validated or audited such data. Although information has been obtained from sources that Franklin Templeton believes to be reliable, no guarantee can be given as to its accuracy and such information may be incomplete or condensed and may be subject to change at any time without notice. The mention of any individual securities should neither constitute nor be construed as a recommendation to purchase, hold or sell any securities, and the information provided regarding such individual securities (if any) is not a sufficient basis upon which to make an investment decision. FT accepts no liability whatsoever for any loss arising from use of this information and reliance upon the comments, opinions and analyses in the material is at the sole discretion of the user.

Products, services and information may not be available in all jurisdictions and are offered outside the U.S. by other FT affiliates and/or their distributors as local laws and regulation permits. Please consult your own financial professional or Franklin Templeton institutional contact for further information on availability of products and services in your jurisdiction.

Please visit www.franklinresources.com to be directed to your local Franklin Templeton website.

Get Content Alerts in My Inbox

Receive email alerts when a new blog is posted.

Leave a reply

Your email address will not be published. Required fields are marked *