The latest Franklin Templeton Institute Global Investment Management Survey highlights the firm’s global market insights on the economy, equities, fixed income and alternative investments.

The US Federal Reserve will deliver four interest rate cuts this year, in line with the four cuts predicted by the futures market and one more than the three cuts projected by the Fed’s own “dot plot,” according to a new Franklin Templeton Institute Global Investment Management Survey.

As a result, the 30-year mortgage rate is projected to fall from nearly 6.7 per cent to roughly 5.6 per cent by the end of 2024, the survey states.

The survey results encompass the views of 300 senior investment professionals at Franklin Templeton from different teams around the world. They cover public and private equity, public and private debt, real estate, digital assets, hedge funds and secondary private market investments.

“The survey – which is one of the largest of its kind – is a starting point in sharing our views on the economy, equities, fixed income and alternatives,” Stephen Dover, chief market strategist and head of the Franklin Templeton Institute, said.

According to the survey’s four focus areas, a global recession should be avoided. Franklin Templeton’s investment professionals expect to see four interest rate cuts in 2024, in line with the futures market, but more than the Fed’s latest dot plot, which is projecting three cuts in 2024. This will lead to the federal funds' rate ending the year at 4.3 per cent, while the Fed dot plot shows 4.63 per cent, the survey states.

Global growth will be slower than consensus expectations across major regions, and noticeably weaker in Europe and China. Inflation will also continue to moderate, but at a slower pace than consensus, and will remain above central bank targets, the firm added.

Equities
The survey reveals that equities will be flat for the year. The S&P 500 Index will end the year at 4744, essentially flat from where it was at the beginning of the year. There will be 5.8 per cent earnings' growth in the US, significantly lower than the 9.7 per cent expected by the market, the firm said.

Value stocks look more promising than growth stocks, and US and emerging markets should be preferred over non-US developed markets, the firm continued.

Fixed income
Driven by Fed policy, geopolitics and recession, the survey shows that two-year treasury yields will likely decline meaningfully while 10-year yields are expected to move only modestly lower.

Municipal bonds will continue to be a high quality, diversifying investment option with attractive tax-free yields. The market should favor investment grade debt due to its higher credit quality as default rates for high yield debt continue to tick higher toward their historical average, the firm said.

Alternatives
Despite the headlines, real estate offers interesting opportunities, the survey states. Commercial real estate presents some interesting opportunities within sectors such as industrials, multifamily and life sciences, it adds, but challenges in the office sector will still persist.

The survey highlights that private credit managers have filled the void created by traditional lenders, and they are able to negotiate favorable terms within sectors such as industrials, multifamily and life sciences. Secondary investments provide diversification across vintages, geography, industry and types of private equity. Within the hedge fund space, macro and market neutral strategies look attractive given the elevated geopolitical risks, the firm said.

Launched in January 2021, the Franklin Templeton Institute is a hub for research and knowledge sharing that unlocks the firm’s competitive advantage as a source of global market insights. California-headquartered Franklin Templeton is a global investment management organization, bringing capabilities in fixed income, equity, alternatives and multi-asset solutions, with about $1.6 trillion in assets under management.