Franklin Templeton’s note lands as a risk-on counterweight to the more cautious Fed and inflation narratives dominating this week, arguing that strong corporate earnings outweigh geopolitical tension and rate uncertainty. Its preference for US, Japan and emerging market equities over Europe and Australia reflects a straightforward AI exposure trade, betting that markets tied to the technology buildout will keep outperforming those more sensitive to energy and commodity swings, a call that puts it somewhat at odds with Australia’s own rate and growth backdrop.
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Earlier on the Fed:
- ICYMI – Barkin says rate path unclear as sticky inflation meets resilient economy
- Fed’s Goolsbee says inflation data improving, hopes tariff effects fade
- ICYMI – Hawkish Fed’s Hammack says acting now on inflation is really critical
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Franklin Templeton is choosing earnings over headlines, and betting the AI trade still has room to run.
Summary:
- Franklin Templeton remains optimistic on equities into August, looking past renewed geopolitical tensions and inflation concerns in favour of strong corporate earnings
- The firm said recent volatility has reset technology valuations and eased stretched sentiment and positioning, improving the setup for further gains
- It retains an AI tilt, overweighting US, Japan and emerging market equities, while staying more cautious on markets with greater energy and commodity sensitivity
- Franklin Templeton sees international duration as relatively attractive, arguing rate hike expectations outside the US look overly optimistic given weaker global growth
- The firm expects the Fed will ultimately need to tighten policy further, citing new Chair Kevin Warsh’s approach as a source of added uncertainty
- Australia is named the firm’s least preferred equity market, citing weak domestic growth, unsupportive fiscal policy and tight monetary policy
Franklin Templeton said it remains optimistic on equities heading into August, arguing that strong corporate earnings outweigh renewed geopolitical tensions and lingering inflation concerns. The firm said recent market volatility has done useful work resetting technology valuations and cooling sentiment and positioning indicators that had been drifting toward exuberance, leaving a healthier setup for further gains.
The firm’s core equity view leans heavily on artificial intelligence exposure, with overweight positions in the US, Japan and emerging markets, and a more cautious stance toward markets with greater sensitivity to energy and commodity prices. It named Australia its least preferred region, pointing to a mix of weak domestic growth, unsupportive fiscal policy and tight monetary policy as reasons for the underweight.
On rates, Franklin Templeton continues to favour international duration over US Treasuries, arguing that weaker growth outlooks outside the United States make current market pricing for rate hikes in those regions look overly aggressive. On the Fed itself, the firm struck a more hawkish note than some of its peers, saying new Chair Kevin Warsh’s approach has introduced additional uncertainty and that it ultimately expects the Fed will need to tighten policy further, a view that puts it closer to Deutsche Bank’s more hawkish gold-adjacent framing than to the more dovish read offered by Fed speakers like Barkin and Goolsbee this week.
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This caught my eye on Japan:
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Franklin Templeton is a global asset management firm headquartered in San Mateo, California, founded in 1947 and built up over subsequent decades through the acquisitions of Templeton Global Investors and Mutual Series, among others, giving it deep roots in both growth investing and value investing traditions. It manages assets across equities, fixed income, multi-asset and alternative strategies through a multi-boutique structure, including well known affiliates such as Franklin Equity Group, Templeton Global Macro, ClearBridge Investments, Western Asset Management and Martin Currie. The firm is publicly traded and one of the larger diversified asset managers globally by assets under management, serving institutional and retail investors worldwide.
This article was written by Eamonn Sheridan at investinglive.com.