Skip to content

CONTRIBUTORS

Sonal Desai, Ph.D.

Chief Investment Officer,
Portfolio Manager

I had the opportunity to discuss my year-ahead outlook on the latest Wall Street Journal “Take on the Week” podcast. We covered a broad range of issues, including the outlook for inflation, Federal Reserve (Fed) policy and bond yields; the uncertainty surrounding the new administration’s policies and the potential impact of tariffs and immigration restrictions; the fiscal deficit and its implications for issuance and yields; the outlook for the dollar and a lot more.

A few highlights:

  • Given sticky inflation, recovering productivity and a strong economy, Fed funds rate is already in the neutral range. The Fed has to claw back prudence now, and I think it will likely stay on hold for the first half of the year and might well be already done with rate cuts.
  • My baseline is for inflation to end the year around current levels. Much will depend on how the policy mix shapes up: tariffs and immigration restrictions could put some temporary pressure on inflation, but streamlining of regulations and greater government efficiency should have the opposite impact, as well as boosting growth.
  • There is quite a bit of cognitive dissonance in the proposed policies: persistent loose fiscal policy points to higher rates, not lower; and tariffs would contribute to a stronger dollar, not weaker.

For a detailed and lively discussion of these issues and more, here is the link to my interview with the Wall Street Journal:

WSJ Take on the Week: Will the Fed cut interest rates again? What investors should know.

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. Active management does not ensure gains or protect against market declines.

IMPORTANT LEGAL INFORMATION

This material is intended to be of general interest only and should not be construed as individual investment advice or a recommendation or solicitation to buy, sell or hold any security or to adopt any investment strategy. It does not constitute legal or tax advice. This material may not be reproduced, distributed or published without prior written permission from Franklin Templeton.

The views expressed are those of the investment manager and the comments, opinions and analyses are rendered as at publication date and may change without notice. 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. The information provided in this material is not intended as a complete analysis of every material fact regarding any country, region or market. 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. 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. All investments involve risks, including possible loss of principal.

Any research and analysis contained in this material 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. Data from third party sources may have been used in the preparation of this material and Franklin Templeton ("FT") has not independently verified, validated or audited such data. 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. The mention of any individual securities should neither constitute nor be construed as a recommendation to purchase, hold or sell any securities, and the information provided regarding such individual securities (if any) is not a sufficient basis upon which to make an investment decision. FT accepts no liability whatsoever for any loss arising from use of this information and reliance upon the comments, opinions and analyses in the material is at the sole discretion of the user.

Franklin Templeton has environmental, social and governance (ESG) capabilities; however, not all strategies or products for a strategy consider “ESG” as part of their investment process.

Products, services and information may not be available in all jurisdictions and are offered outside the U.S. by other FT affiliates and/or their distributors as local laws and regulation permits. Please consult your own financial professional or Franklin Templeton institutional contact for further information on availability of products and services in your jurisdiction.

Issued in the U.S.: Franklin Resources, Inc. and its subsidiaries offer investment management services through multiple investment advisers registered with the SEC. Franklin Distributors, LLC and Putnam Retail Management LP, members FINRA/SIPC, are Franklin Templeton broker/dealers, which provide registered representative services.  Franklin Templeton, One Franklin Parkway, San Mateo, California 94403-1906, (800) DIAL BEN/342-5236, franklintempleton.com.

This site is intended only for U.S. Institutional Investors and Consultants. Using it means you agree to our Terms of Use.

If you would like information on Franklin Templeton’s retail mutual funds, please visit www.franklintempleton.com.

CFA® and Chartered Financial Analyst® are trademarks owned by CFA Institute.