Defying recent bullish sentiment investment specialists across the US-listed multi-affiliate firm, Franklin Templeton, expect markets to end 2024 much as they started.
According to the inaugural Franklin Templeton Institute survey of 300 senior investment staff, the S&P 500 benchmark is likely to close the year with an index reading of 4,744.
The S&P 500 breached 5,000 for the first time this February, holding above the psychological high watermark since.
Collectively, the Franklin Templeton investors are also less upbeat on US corporate profit potential in 2024 than the broader market with the survey tipping earnings growth of 5.8 per cent this year versus the consensus pick of 9.7 per cent.
Respondents rate value companies as “more promising than growth stocks, and U.S. and emerging markets should be preferred over non-U.S. developed markets”.
For fixed income, the diverse group of Franklin Templeton investors lean towards a “meaningful” decline in short-term yields while longer-end debt “moves only modestly lower”.
“Investment grade debt will be in favor due to its higher credit quality as default rates for high yield debt continue to tick higher towards their historical average,” the report says.
Survey respondents also favour alternative strategies in private debt and certain private equity investment while some real estate sectors offer “interesting opportunities” despite negative press.
Hedge funds covering “macro and market neutral strategies look attractive given elevated geopolitical risks”, the report says.
The Franklin Templeton sample group, too, land on the bearish side of macro forecasts in 2024, picking just four US Federal Reserve cuts this year – one more than the central bank itself but well behind the six implied by futures bets.
Meanwhile, the survey shows the cohort expect slightly higher inflation (2.7 per cent) to persist this year compared to both the Fed (2.4 per cent) and the wider market (2.6 per cent).
“Global growth will be slower than consensus expectations across major regions,” the study says.
The California-headquartered investment giant houses multiple fund brands including ClearBridge, Clarion Partners, Martin Currie, Western Asset Management and Brandywine Global in addition to Franklin-label managers.
Franklin Templeton is best-known in NZ for the unconstrained fixed income manager, Brandywine Global, which has several large mandates here as well as an established portfolio investment entity product.
In 2021, the group launched the Institute as “an innovative hub for research and knowledge sharing that unlocks the firm’s competitive advantage as a source of global market insights”, according to a release.
Stephen Dover, Franklin Templeton chief market strategies and Institute head, said the just-released survey “is one of the largest of its kind – is a starting point in sharing our views on the economy, equities, fixed income and alternatives”.
“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,” Dover said.