Many investors were leery about diving into the market last year, and who can blame them given global debt debacles, job and housing concerns, and a shaky growth outlook. While the market still faces these crosscurrents, the S&P 500’s best January performance in more than a decade 1 and the recent reprieve in a key measure of market volatility are providing hints that gun-shy investors might be dipping a toe back in.
Easier said than done for some. After the rollercoaster that was 2011, trying to explain why now seems like a good time to venture back in still sounds a little crazy. But for those who are looking for some perspective, you’ve come to the right place. Read on for why Ed Jamieson, president/CIO of Franklin Equity Group®, Peter Langerman, president/CEO of Mutual Series®, Gary Motyl, president/CIO of Templeton Global Equity Group, and Mark Mobius, executive chairman of Templeton Emerging Markets Group, all think it might be time for investors to consider taking the plunge. In brief:
Gary Motyl: “We do expect the global GDP environment to remain challenging—looking for slower global GDP growth but still growth.”
Ed Jamieson: “The market appears more relaxed about world events than one might imagine.”
Peter Langerman: “If you look at one of the commonly referenced measures of volatility, the Chicago Board Options Exchange Market Volatility Index, or the VIX, we are actually at a level which isn’t that far above where we were all the way back in 2007.”
Mark Mobius: “I don’t believe China’s economy is going to experience a hard landing. I expect the China plane will keep on flying.” Read more…
Every now and again we get the opportunity for a more a personal chat with one of the portfolio managers here. The opportunity recently arose again, this time with Bill Lippman: a Bronx native, tennis fanatic, and, by the way, CIO for the US Value, Franklin Equity Group. With 60-odd years in the business the always charismatic Mr. Lippman certainly can share some memorable stories. Read on…
On How He Got Into Asset Management
As a young man out of college, I was running a sales organization. It had nothing to do with the financial services industry, although I did graduate with an MBA that focused on finance. These were tough times back then, and one of our best salesman made an incredible commission that year – this was amazing – $30,000. Can you imagine such a huge amount!
He quit that year, and I called him back in and I said: “I’m just curious. You made $30,000 here this year, which was outstanding. Everyone else made $15,000 if they were lucky. Where are you going?” He said, “I’m going to work for a mutual fund organization.” I said, “You really think you’re going to make more money there than here?” He said, “Yes!”
You might be forgiven for thinking that you’ve just woken from a three-year coma: To many investors, the steep market declines of recent days have echoes of September, 2008. But today’s volatility has different roots – and presents different challenges. Friday’s S&P downgrade of the long-term U.S. sovereign credit rating only added to a growing list of concerns. In the excerpted conversations with Franklin Templeton investment professionals below, we’ll explore the current market environment, where there are challenges, and where there may be potential opportunities for savvy investors.
On the causes of the downgrade:
Few attentive investors doubted a U.S. credit downgrade was possible. Anyone following the U.S. debt ceiling debacle saw American politics hit an ugly new low – even as S&P warned that policymakers needed a viable consensus for significantly reducing the national deficit. As Roger Bayston, Director of Fixed Income for the Franklin Templeton Fixed Income Group®notes,
“News of the U.S. long-term sovereign credit downgrade by Standard & Poor’s (S&P) to AA+ from AAA on August 5, 2011, was not entirely unexpected. On April 18, 2011, S&P changed its outlook on U.S. debt to “negative” from “stable.” Furthermore, on July 14, 2011, S&P placed the U.S. on a Credit/Watch Negative warning. According to S&P, these actions were prompted by the U.S. government’s lack of ability to agree on a viable plan to reduce the country’s deficit over the long term.”