Stephen Dover
The inaugural Franklin Templeton Institute Global Investment Management Survey reports that 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.”
The survey results, revealed 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.”
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 favour 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.