Introduction
Franklin Templeton Investment Solutions (FTIS) held its sixth annual Investment Symposium on November 13. This live research-focused forum delved into the most pressing topics facing investors today, including forward-looking views on the US economy and the outcome of the US elections, geopolitical tensions, climate change, artificial intelligence (AI), credit markets and asset-allocation views (current opportunities/risk).
The event was divided into five panels, which gave us the chance to ask the really big questions on key topics we believe will influence returns and risk over the next decade.
At times, there was agreement; often, there was spirited debate. The panels were:
- The magnificent US? US exceptionalism and US elections
- Too hot to handle: How ever-rising tensions and temperatures will impact markets
- Can generative AI generate alpha?
- Gimme credit! Can companies keep borrowing forever?
- Asset allocation—Where are you seeing risk and opportunity?
These conversations have significant practical applications; primarily, they help FTIS form its long-term Capital Market Expectations, which are used as the basis of portfolio construction for clients and prospects. This represents the views expressed by our panelists.
WHAT ARE THE RISKS?
All investments involve risks, including 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.
Equity securities are subject to price fluctuation and possible loss of principal. Small- and mid-cap stocks involve greater risks and volatility than large-cap stocks. There can be no assurance that multi-factor stock selection process will enhance performance. Exposure to such investment factors may detract from performance in some market environments, perhaps for extended periods.
Active management does not ensure gains or protect against market declines. The allocation of assets among different strategies, asset classes and investments may not prove beneficial or produce the desired results.
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. There are special risks associated with investments in China, Hong Kong and Taiwan, including less liquidity, expropriation, confiscatory taxation, international trade tensions, nationalization, and exchange control regulations and rapid inflation, all of which can negatively impact the fund. Investments in Taiwan could be adversely affected by its political and economic relationship with China.
Investments in fast-growing industries like the technology sector (which historically has been volatile) could result in increased price fluctuation, especially over the short term, due to the rapid pace of product change and development and changes in government regulation of companies emphasizing scientific or technological advancement or regulatory approval for new drugs and medical instruments.
Investments in many alternative investment strategies are complex and speculative, entail significant risk and should not be considered a complete investment program. Depending on the product invested in, an investment in alternative strategies may provide for only limited liquidity and is suitable only for persons who can afford to lose the entire amount of their investment. An investment strategy focused primarily on privately held companies presents certain challenges and involves incremental risks as opposed to investments in public companies, such as dealing with the lack of available information about these companies as well as their general lack of liquidity.
Diversification does not guarantee a profit or protect against a loss.
Any companies and/or case studies referenced herein are used solely for illustrative purposes; any investment may or may not be currently held by any portfolio advised by Franklin Templeton. The information provided is not a recommendation or individual investment advice for any particular security, strategy, or investment product and is not an indication of the trading intent of any Franklin Templeton managed portfolio.