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GLOBAL MACRO SHIFTS

The Fed’s Long Unwinding Road
with Michael Hasenstab, Ph.D.

Quantitative easing (QE) by the US Federal Reserve (Fed) has played an influential role in global financial markets over the past decade. In September this year, the Fed confirmed plans to begin unwinding its QE holdings in October. Yet asset prices have generally been unaffected by the news, reflecting a sense of complacency. Templeton Global Macro believes risks and challenges are ahead on the Fed’s road to policy normalization, with three factors that have potential to push bond yields higher than market expectations.

The Elephant in the Room

What lies ahead on the Fed’s road to policy normalization? Dr. Hasenstab discusses what he thinks the market is missing.

Economic and Market Implications of the Great Unwinding

What does the Fed’s quantitative tightening mean to investors? Dr. Hasenstab breaks down the forces that he thinks will likely take inflation and US Treasury yields to new highs.

What Are the Risks?

All investments involve risks, including possible loss of principal. Bond prices generally move in the opposite direction of interest rates. Thus, as the prices of bonds in an investment portfolio adjust to a rise in interest rates, the value of the portfolio may decline. Special risks are associated with foreign investing, including currency fluctuations, economic instability and political developments. Investments in developing markets, of which frontier markets are a subset, involve heightened risks related to the same factors, in addition to those associated with these markets' smaller size, lesser liquidity and lack of established legal, political, business and social frameworks to support securities markets.

Important Legal Information

These materials reflect the analysis and opinions of the authors as they intended on the stated publication dates, and may differ from the opinions of other portfolio managers, investment teams or platforms at Franklin Templeton Investments. They are intended to be of general interest only and not construed as individual investment advice or a recommendation or solicitation to buy, sell or hold any security or to adopt any investment strategy. They do not constitute legal or tax advice. For more information on any of our funds, contact your financial advisor or download a free prospectus. Investors should carefully consider a fund's investment goals, risks, sales charges and expenses before investing. The prospectus contains this and other information. Please read the prospectus carefully before investing or sending money.