Money Managers Optimistic About U.S. Economy, Inflation, Interest Rates and More
12 Junio 2024 - 8:15AM
Business Wire
Franklin Templeton Institute’s Global
Investment Management Survey provides insights on the economy,
equities, fixed income and alternative investments
Professional investors are more optimistic about the U.S.
economy than they were at the beginning of the year due to the
strong stock market, declining inflation, steady unemployment
figures and solid corporate balance sheets, according to the latest
Global Investment Management Survey by the Franklin Templeton
Institute.
The results of the latest survey, which was conducted in May,
encompass the views of more than 250 of Franklin Templeton’s senior
investment professionals from different teams around the world with
unique knowledge, processes and perspectives. The respondents 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. The Franklin
Templeton Institute’s inaugural Global Investment Management Survey
was conducted in January 2024.
“When we first conducted this survey in January, we said a
global recession should be avoided,” said Stephen Dover, Chief
Market Strategist and Head of the Franklin Templeton Institute.
“Today’s economy is better than it was at the beginning of the
year. In fact, we’re now expecting just one or two interest rate
cuts from the U.S. Federal Reserve rather than the four we’d
predicted six months ago.”
Based on the survey’s results, other positive signs include the
following:
- Respondents are more positive about U.S. economic growth in the
second half of the year than they were in January. They expect 2.3%
gross domestic product (GDP) growth in 2024, on average, compared
to expectations of 1.6% growth in January’s survey.
- U.S. unemployment is expected to remain historically low
despite a projected increase from 4.0% to 4.1%.
- Inflation, as measured by U.S. Core Personal Consumption
Expenditures (PCE), is expected to stabilize and finish the year
around 2.9%, essentially in line with the current reading of
2.8%.
- Most survey respondents expect the federal funds rate to end
the year between 4.75% and 5.25%.
The story outside the U.S. is mixed:
- Survey respondents are more positive on Europe’s economic
growth than they were six months ago, expecting 1.2% GDP growth in
2024, on average, compared to their expectation of 0.6% GDP growth
in January 2024.
- The stock markets in India, Japan and China are expected to
outperform the U.S. equity market in 2024. Japan, in particular, is
favored by 33% of respondents due to structural and corporate
governance reforms.
- The majority of respondents expect 3% to 5% growth in China’s
GDP.
- When it comes to the future performance of equities,
respondents favor developed market stocks over emerging market
stocks given improving fundamentals in Europe and Japan. India is
one exception as its economic transformation continues.
“It’s certainly good news that the economy and corporate
earnings have been stronger than expected in the first half of this
year,” Dover added. “The downside is that we believe there’s no
more upside for the S&P 500 Index now. In other words, the
stock market is expensive.”
The complete survey results can be found here.
Additional predictions from survey’s focus areas
Equities likely to be flat in
2024
- Earnings are expected to grow at 7.4% in the U.S. versus the
FactSet consensus prediction of 10.4%.
- The S&P 500 Index is expected to hit 5250 before the end of
this year. At the same time, almost 66% of respondents anticipate
more volatility in the U.S. equity market.
- The fundamental drivers of the S&P 500 are positive
earnings estimate revisions, stable / stronger U.S. real GDP, lower
U.S. 10-year note yields and multiple compression.
- Although small cap stocks were favored in January, sentiment
has shifted. This time around, U.S. growth and U.S. large cap
stocks are favored due to their free cash flow yield, return on
invested capital and return on equity.
- Favored sectors include technology, industrials, energy, health
care and financials.
Fixed income hinges on Fed policy,
geopolitics, lower corporate earnings
- Nearly two-thirds (63%) of respondents expect the 10-year U.S.
Treasury rate to be between 4.00% and 4.50% at the end of 2024. The
reading at the end of May was 4.61%.
- Investment grade bond spreads over U.S. Treasuries with similar
maturity profiles are expected to be between 90 and 100 basis
points (bps) at the end of 2024 compared to the current reading of
85 bps.
- High yield spreads are expected to be between 325 and 375 bps
compared to the current reading of 308 bps.
- High yield defaults started the year at 2.5% – much lower than
the historical default rate of 3.5%. Most respondents expect the
rate to end 2024 between 2% and 4%.
- Due to its higher credit quality, investment grade debt is
favored as default rates for high yield bonds are likely to tick
upward toward their historical average.
- Municipal bonds should continue to be a high-quality,
diversifying investment option with attractive tax-free
yields.
Alternatives: Private equity secondaries
are attractive
- Secondary investments continue to look attractive given the
stalled exits in private equity as well as institutions’ need for
liquidity.
- Seasoned private credit managers are expected to help fill the
void created by the pullback of traditional lenders.
- Real estate debt appears to be a good option given historically
attractive risk-adjusted returns. The office sector should continue
to be under duress, but there are opportunities in industrials,
multifamily housing and life sciences.
There is no assurance that any estimate, forecast or
projection will be realized.
About the survey
The survey provides a comprehensive summation of the views of
more than 250 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.
First conducted in January 2024, the survey is a starting point
for Franklin Templeton clients, including financial advisors and
institutional investors, to understand the firm’s views on the
economy, equities, fixed income and alternatives. For an overview
of the January survey, click here.
The Franklin Templeton Institute, launched in January 2021, 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 1,500 investment
professionals, and offices in major financial markets around the
world, the California-based company has over 75 years of investment
experience and over $1.6 trillion in assets under management as of
May 31, 2024. For more information, please visit
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