This website uses cookies to collect usage information in order to offer a better browsing experience. By browsing this site or by clicking on the "ACCEPT COOKIES" button you accept our Cookie Policy.

Quick Thoughts: The Growth and Inflation Argument Continues

By:

Chief Market Strategist and Head of Franklin Templeton Investment Institute Franklin Templeton

When it comes to questions about inflation, growth, and the impacts of vaccination rates on global economies, many of us are asking: what’s next? Our Head of the Franklin Templeton Investment Institute, Stephen Dover, and five economists from Franklin Templeton’s specialist investment teams discuss the current environment and how it shapes their views on the path forward.

When it comes to questions about inflation, growth, and the impacts of vaccination on global economies, many of us are asking: what’s next? Will economies continue on their current growth trajectories? Will inflation remain transitory or continue at high levels into 2022? Where are interest rates going? And, how will different economies react to inflationary changes and policies aimed at stimulating economic growth, as every country has varying goals and a mixture of social and economic policies? I had the opportunity to get the perspectives of five economists from Franklin Templeton’s specialist investment teams. Here are some highlights of our conversations:

  • Our economists diverge on what economic growth will look like in the second half of 2021. There is uncertainty about the pace of economic recovery for countries that lag in vaccinations or experience the proliferation of COVID-19 variants. Initial expectations for how economies recover based on the shape of prior COVID-19 peaks are being tested, even in countries with high vaccination rates. For example, Israel has experienced high case rates and hospitalizations despite high vaccination levels.
  • The many paths to economic normalization require critical variables: reasonable inflation rates, high levels of vaccination, and fiscal and monetary stimulus.
  • Inflation, especially inflation expectations, continues to be a significant focus for our investment teams as inflation figures rose this year in several countries, driven by a combination of factors that included supply/demand constraints, vast fiscal and monetary stimulus in many countries, cyclical upswings associated with resurgent economic activity, and the spending of excess savings.
  • Our economists differ on whether inflation will remain transitory or continue to remain at high levels into 2022. The economic data continue to show sharply rising prices, which put pressure on fiscal and monetary authorities to adjust policy to prevent economic overheating. The volatile nature of how governments and consumers respond, from both policy and behavioral perspectives, creates a growing range of potential economic outcomes.

To dig deeper, I invite you to read Macro Perspectives: A second-half surge, or pause? for more on how our contributors’ views both converge and diverge on what economic growth will look like in the second half of this year.

Originally Posted on September 9, 2021 – Quick Thoughts: The Growth and Inflation Argument Continues

What Are the Risks?

All investments involve risks, including 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. Past performance is not an indicator or a guarantee of future results.

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.

Issued in the U.S. by Franklin Distributors, LLC, One Franklin Parkway, San Mateo, California 94403-1906, (800) DIAL BEN/342-5236, franklintempleton.com – Franklin Distributors, LLC, member FINRA/SIPC, is the principal distributor of Franklin Templeton U.S. registered products, which are not FDIC insured; may lose value; and are not bank guaranteed and are available only in jurisdictions where an offer or solicitation of such products is permitted under applicable laws and regulation.

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

Disclosure: Franklin Templeton

The comments, opinions and analyses expressed herein are for informational purposes only and should not be considered individual investment advice or recommendations to invest in any security or to adopt any investment strategy. Because market and economic conditions are subject to rapid change, comments, opinions and analyses are rendered as of the date of the posting and may change without notice. The material is not intended as a complete analysis of every material fact regarding any country, region, market, industry, investment or strategy.

This information is intended for US residents only.

Disclosure: Interactive Brokers

Information posted on IBKR Traders’ Insight that is provided by third-parties and not by Interactive Brokers does NOT constitute a recommendation by Interactive Brokers that you should contract for the services of that third party. Third-party participants who contribute to IBKR Traders’ Insight are independent of Interactive Brokers and Interactive Brokers does not make any representations or warranties concerning the services offered, their past or future performance, or the accuracy of the information provided by the third party. Past performance is no guarantee of future results.

This material is from Franklin Templeton and is being posted with permission from Franklin Templeton. The views expressed in this material are solely those of the author and/or Franklin Templeton and IBKR is not endorsing or recommending any investment or trading discussed in the material. This material is not and should not be construed as an offer to sell or the solicitation of an offer to buy any security. To the extent that this material discusses general market activity, industry or sector trends or other broad based economic or political conditions, it should not be construed as research or investment advice. To the extent that it includes references to specific securities, commodities, currencies, or other instruments, those references do not constitute a recommendation to buy, sell or hold such security. This material does not and is not intended to take into account the particular financial conditions, investment objectives or requirements of individual customers. Before acting on this material, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.

In accordance with EU regulation: The statements in this document shall not be considered as an objective or independent explanation of the matters. Please note that this document (a) has not been prepared in accordance with legal requirements designed to promote the independence of investment research, and (b) is not subject to any prohibition on dealing ahead of the dissemination or publication of investment research.

trading top