Money Managers Optimistic About U.S. Economy, Inflation, Interest Rates and More

Franklin Templeton Institute’s Global Investment Management Survey provides insights on the economy, equities, fixed income and alternative investments

Professional investors are more optimistic about the U.S. economy than they were at the beginning of the year due to the strong stock market, declining inflation, steady unemployment figures and solid corporate balance sheets, according to the latest Global Investment Management Survey by the Franklin Templeton Institute.

The results of the latest survey, which was conducted in May, encompass the views of more than 250 of Franklin Templeton’s senior investment professionals from different teams around the world with unique knowledge, processes and perspectives. The respondents span the breadth of Franklin Templeton, covering public and private equity, public and private debt, real estate, digital assets, hedge funds and secondary private market investments. The Franklin Templeton Institute’s inaugural Global Investment Management Survey was conducted in January 2024.

“When we first conducted this survey in January, we said a global recession should be avoided,” said Stephen Dover, Chief Market Strategist and Head of the Franklin Templeton Institute. “Today’s economy is better than it was at the beginning of the year. In fact, we’re now expecting just one or two interest rate cuts from the U.S. Federal Reserve rather than the four we’d predicted six months ago.”

Based on the survey’s results, other positive signs include the following:

  • Respondents are more positive about U.S. economic growth in the second half of the year than they were in January. They expect 2.3% gross domestic product (GDP) growth in 2024, on average, compared to expectations of 1.6% growth in January’s survey.
  • U.S. unemployment is expected to remain historically low despite a projected increase from 4.0% to 4.1%.
  • Inflation, as measured by U.S. Core Personal Consumption Expenditures (PCE), is expected to stabilize and finish the year around 2.9%, essentially in line with the current reading of 2.8%.
  • Most survey respondents expect the federal funds rate to end the year between 4.75% and 5.25%.

The story outside the U.S. is mixed:

  • Survey respondents are more positive on Europe’s economic growth than they were six months ago, expecting 1.2% GDP growth in 2024, on average, compared to their expectation of 0.6% GDP growth in January 2024.
  • The stock markets in India, Japan and China are expected to outperform the U.S. equity market in 2024. Japan, in particular, is favored by 33% of respondents due to structural and corporate governance reforms.
  • The majority of respondents expect 3% to 5% growth in China’s GDP.
  • When it comes to the future performance of equities, respondents favor developed market stocks over emerging market stocks given improving fundamentals in Europe and Japan. India is one exception as its economic transformation continues.

“It’s certainly good news that the economy and corporate earnings have been stronger than expected in the first half of this year,” Dover added. “The downside is that we believe there’s no more upside for the S&P 500 Index now. In other words, the stock market is expensive.”

The complete survey results can be found here.

Additional predictions from survey’s focus areas

Equities likely to be flat in 2024

  • Earnings are expected to grow at 7.4% in the U.S. versus the FactSet consensus prediction of 10.4%.
  • The S&P 500 Index is expected to hit 5250 before the end of this year. At the same time, almost 66% of respondents anticipate more volatility in the U.S. equity market.
  • The fundamental drivers of the S&P 500 are positive earnings estimate revisions, stable / stronger U.S. real GDP, lower U.S. 10-year note yields and multiple compression.
  • Although small cap stocks were favored in January, sentiment has shifted. This time around, U.S. growth and U.S. large cap stocks are favored due to their free cash flow yield, return on invested capital and return on equity.
  • Favored sectors include technology, industrials, energy, health care and financials.

Fixed income hinges on Fed policy, geopolitics, lower corporate earnings

  • Nearly two-thirds (63%) of respondents expect the 10-year U.S. Treasury rate to be between 4.00% and 4.50% at the end of 2024. The reading at the end of May was 4.61%.
  • Investment grade bond spreads over U.S. Treasuries with similar maturity profiles are expected to be between 90 and 100 basis points (bps) at the end of 2024 compared to the current reading of 85 bps.
  • High yield spreads are expected to be between 325 and 375 bps compared to the current reading of 308 bps.
  • High yield defaults started the year at 2.5% – much lower than the historical default rate of 3.5%. Most respondents expect the rate to end 2024 between 2% and 4%.
  • Due to its higher credit quality, investment grade debt is favored as default rates for high yield bonds are likely to tick upward toward their historical average.
  • Municipal bonds should continue to be a high-quality, diversifying investment option with attractive tax-free yields.

Alternatives: Private equity secondaries are attractive

  • Secondary investments continue to look attractive given the stalled exits in private equity as well as institutions’ need for liquidity.
  • Seasoned private credit managers are expected to help fill the void created by the pullback of traditional lenders.
  • Real estate debt appears to be a good option given historically attractive risk-adjusted returns. The office sector should continue to be under duress, but there are opportunities in industrials, multifamily housing and life sciences.

There is no assurance that any estimate, forecast or projection will be realized.

About the survey

The survey provides a comprehensive summation of the views of more than 250 of Franklin Templeton’s investment professionals who focus on both public and private markets across asset classes. The specific forecasts within the survey reflect the average of the group; each investment team operates independently and has its own views.

First conducted in January 2024, the survey is a starting point for Franklin Templeton clients, including financial advisors and institutional investors, to understand the firm’s views on the economy, equities, fixed income and alternatives. For an overview of the January survey, click here.

The Franklin Templeton Institute, launched in January 2021, is an innovative hub for research and knowledge sharing that unlocks the firm’s competitive advantage as a source of global market insights.

The views expressed are those of the investment manager and the comments, opinions and analyses are rendered as of the 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.

About Franklin Templeton

Franklin Resources, Inc. [NYSE:BEN] is a global investment management organization with subsidiaries operating as Franklin Templeton and serving clients in over 150 countries. Franklin Templeton’s mission is to help clients achieve better outcomes through investment management expertise, wealth management and technology solutions. Through its specialist investment managers, the company offers specialization on a global scale, bringing extensive capabilities in fixed income, equity, alternatives and multi-asset solutions. With more than 1,500 investment professionals, and offices in major financial markets around the world, the California-based company has over 75 years of investment experience and over $1.6 trillion in assets under management as of May 31, 2024. For more information, please visit and follow us on LinkedIn, X and Facebook.

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“Today’s economy is better than it was at the beginning of the year. We’re expecting one or two interest rate cuts from the Federal Reserve rather than the four we’d predicted six months ago," said Stephen Dover, Head of the Franklin Templeton Institute.


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