Skip to content

CONTRIBUTORS

Michael Hasenstab, Ph.D.

Portfolio Manager, Chief Investment Officer, Templeton Global Macro®

Calvin Ho, Ph.D.

Portfolio Manager, Director of Research, Templeton Global Macro

This month’s Global Macro Insights offers a comprehensive update on regional developments, along with analysis of the key opportunities and challenges shaping the current macroeconomic landscape.        

Key takeaways

April overview: The Middle East conflict continued to dominate news headlines in April, and oil prices remained at elevated levels. There was nevertheless some improvement in risk sentiment over the month compared to the earlier risk-off market reactions—the US dollar (USD) weakened, while US Treasury yields rose slightly and emerging market (EM) bonds gained over the month. Developed market central banks that held meetings during April left interest rates unchanged, but noted the risks to both growth and inflation outlooks from the war, and we see some signs of hawkishness creeping in. Some inflation data are already showing evidence of the impact of higher energy prices. Growth data mostly continued to show some resilience even as outcomes remained fairly soft.

Outlook: Uncertainty about growth and inflation stemming from the Iran conflict has dominated the conversation about the global economic outlook. The International Monetary Fund (IMF), in its latest World Economic Outlook (WEO), has modestly downgraded its global growth forecast, but notes that downside risks dominate the outlook, with these risks including a longer or broader conflict and worsening geopolitical fragmentation. It continues to project EM growth to significantly outperform advanced economies. Among EMs, we highlight that while resilience remains a notable broad factor, differing sensitivities and policy responses to the oil shock require careful country-by-country analysis. Uncertainty about the path of monetary policy also remains high under current circumstances, with various central banks pointing to growth and inflation risks stemming from the Iran conflict. Our thesis of “global rewiring” remains intact.

WHAT ARE THE RISKS?

All investments involve risks, including possible loss of principal. There is no assurance that any estimate, forecast, or projection will be realized.

Fixed income securities involve interest rate, credit, inflation and reinvestment risks, and possible loss of principal. As interest rates rise, the value of fixed income securities falls. Low-rated, high-yield bonds are subject to greater price volatility, illiquidity and possibility of default.

Currency management strategies could result in losses if currencies do not perform as expected.

Active management does not ensure gains or protect against market declines.

Diversification does not guarantee a profit or protect against a loss.

International investments are subject to special risks, including currency fluctuations and social, economic and political uncertainties, which could increase volatility. These risks are magnified in emerging markets. Investments in companies in a specific country or region may experience greater volatility than those that are more broadly diversified geographically. The government’s participation in the economy is still high and, therefore, investments in China will be subject to larger regulatory risk levels compared to many other countries.

WF: 10336209

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.

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 information provided in this material is not intended as a complete analysis of every material fact regarding any country, region or market. All investments involve risks, including possible loss of principal.

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. 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.

Issued by Franklin Templeton Investment Management Limited (FTIML). Registered office: Cannon Place, 78 Cannon Street, London EC4N 6HL. FTIML is authorised and regulated by the Financial Conduct Authority.

Investments entail risks, the value of investments can go down as well as up and investors should be aware they might not get back the full value invested.

CFA® and Chartered Financial Analyst® are trademarks owned by CFA Institute.