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CONTRIBUTORS

John Beck

Director of Global Fixed Income,
Portfolio Manager
United Kingdom

Stuart Lingard

Senior Client Portfolio Manager
Franklin Templeton Fixed Income

Alex Lee

Head of Canada ETF Product Strategy
Franklin Templeton Investments

Juan Gerardo Cruz

Client Portfolio Analyst
Franklin Templeton Fixed Income

Key takeaways

  • The aggressive monetary policy tightening of 2022 and 2023 helped create an attractive entry point for fixed income investors in 2024.
  • Yields remain elevated versus historical levels, while global central banks embarking on monetary policy easing should provide a tailwind for bond portfolios going forward.
  • We believe that now is the time to benefit from these compelling yields, ahead of potential declines.
  • At the same time, opening up portfolios to include global investment opportunities can help to achieve higher potential risk-adjusted returns.

Introduction

Geopolitical turmoil, surging inflation and monetary policy tightening provided a challenging backdrop for bond investors in 2022 and 2023. However, we believe that the rest of 2024 offers a much more constructive environment for fixed income investing, with a multitude of potential opportunities not only across North America but also Europe and many emerging markets (EMs).

In this publication, we would like to explain why, in our view, now is an opportune time to invest in global bonds, which can provide additional return potential versus a domestic bond portfolio. In the following, we aim to demonstrate that there are benefits to diversifying a portfolio utilizing different sovereign issuers and currencies.

WHAT ARE THE RISKS?

All investments involve risks, including possible loss of principal.

Equity securities are subject to price fluctuation and possible loss of principal.

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.

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.

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

Important Legal Information

This document is for information only and does not constitute investment advice or a recommendation and was prepared without regard to the specific objectives, financial situation or needs of any particular person who may receive it. This document may not be reproduced, distributed or published without prior written permission from Franklin Templeton.

Any research and analysis contained in this document 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. 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. Any views expressed are the views of the fund manager as of the date of this document and do not constitute investment advice. 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. 

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. Franklin Templeton accepts no liability whatsoever for any direct or indirect consequential loss arising from the use of any information, opinion or estimate herein.

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.

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