It’s easy to jump to conclusions based on shocking headlines and dire predictions. If that’s all you read, you’d probably be walking around with a stiff neck from looking up, waiting for the sky to fall. Beneath the sensational headlines often lies a more mundane story. This could be the case with the current bout of muni-bond default mania, which harkens back to the muni-market panic in December 2010. Bankruptcy filings in a few California cities could certainly be considered evidence of some of the serious debt problems in the U.S., but they don’t necessarily tell the whole story of the municipal bond market. To fill in the missing pieces, we turned to Franklin Municipal Bond Department Co-Directors Sheila Amoroso and Rafael Costas, and Franklin High Yield Tax-Free Income Fund and Franklin California Tax-Free Income Fund Manager John Wiley, three muni-minded professionals each with 20+ years of experience who aim to put these current developments in perspective.
In a time of severe stress and crisis, it’s easy to come to the conclusion that Armageddon is upon us. Those who believe the European Union is going to split up and China’s growth will come to a screeching halt are probably building bunkers and sharpening their survival skills right about now. Dr. Michael Hasenstab, Templeton Global Bond Fund portfolio manager and co-director of Franklin Templeton Fixed Income Group’s® International Bond Department, isn’t in panic mode. In fact, he’s optimistic the eurozone will survive, and that no, China won’t move back into the feudal age. However, he does believe there are some game-changing events taking place in the financial markets and in China today that will have future consequences for investors—some potentially good, but others maybe not so much. As a long-term investor, he’s planning ahead for these potential future consequences, and is seeking out the high ground.
Hasenstab’s assessment of current events, in his words:
Dr. Michael Hasenstab
“Things are difficult, but I don’t think we need to believe the Armageddon scenario. Greece appears financially terminal, but in my view, Italy and Spain by no means have to be financially terminal.”
“A country may print its way out of a liquidity crisis, but it can’t print its way out of a solvency crisis or print its way to lower unemployment rates.”
“I think there is no question China is in a mini cyclical slowdown, but nowhere near a precipitous drop.”
“Wage pressures in China have important global implications. Today, I believe China is on the cusp of exporting inflation, a completely different dynamic.”
“I don’t believe there’s a risk-free asset anymore. The question is whether you are getting rewarded for the risk you are taking. There are always opportunities, and I think if you have a long-term perspective, you can be rewarded.” Read more…
Six months into 2012, investors whose New Year’s resolutions included a vow to hold strong through market dismay may be finding that the eurozone crisis and slowing global growth are testing their resolve. As we move into the second half of the year, sluggish growth and continued market uncertainty seem likely to be ongoing scenarios for the U.S., as the nation faces a fall presidential election and teeters on the edge of a precarious-sounding “fiscal cliff.” In this sobering Beyond Bulls & Bears post, Chris Molumphy, Executive Vice President and CIO of the Franklin Templeton Fixed-Income Group®, offers some cautiously optimistic mid-year perspective on the U.S. economy.
Molumphy’s thoughts, in brief:
“While there are certainly headwinds (in the U.S. economy), we feel that there is a reasonably solid base, and not a backdrop that appears likely to lead to a double-dip recession.”
“Although employment growth has stalled out a bit over the past several months, our view is that we would expect a gradual—and an emphasis on gradual—improvement over the coming months and quarters.”
“We don’t envision significant upside in the coming months and quarters in housing, but we think we finally may be seeing some stability in the overall market.”
“This could be the fourth year in a row for the U.S. to run a deficit in excess of $1 trillion, and as the total debt climbs, the U.S. could be in danger of further ratings downgrades come first quarter of next year without a realistic debt reduction plan in place.” Read more…
In the already quite tiresome battle against low-yield, dividends have emerged as an attractive opportunity set to help counter investment stagnation. For this Beyond Bulls & Bears post we thought we’d shake things up a bit, bringing you a one, two, three dividends punch with not one, but three fund managers with expertise in dividend-paying stocks. See below for a 4 1/2- minute video featuring Ed Perks, who manages Franklin Income Fund and Franklin Balanced Fund, Alan Muschott, co-manager for Franklin Equity Income Fund and Don Taylor, portfolio manager for Franklin Rising Dividends Fund, as they break down how they’ve been weathering market volatility and unearthing dividend-paying stock opportunities.
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