Global growth has been accelerating, but there are a few potential headwinds that could cause it to stall. Three of our senior investment leaders—Ed Perks, Chris Molumphy and Stephen Dover—recently participated in a panel discussion on the potential impact of trade tensions, inflation and other issues on their radar.

Here are some highlights:

  • Ed Perks: Generally I think we are still in a good place. We think gross domestic product (GDP) growth globally is still accelerating, especially from where we’ve been in this economic cycle. That’s largely due to very strong growth in the United States, but also areas like Europe and Japan and emerging markets are still contributing nicely to growth. One thing we haven’t seen more recently with some of the recent market volatility is a true kind of risk-off mode where US Treasuries become a haven. But I think that dynamic likely will change.
  • Stephen Dover: For the most part, we’re seeing coordinated global growth in a way we haven’t ever seen before. Emerging markets continue to have very strong economic growth and I think that’s very positive going forward. In regard to inflation, I think what’s missing is the 10-year discussion we’ve had on deflation and the great fear we had about deflation. That’s what the reserve banks and the economists were concerned about. If anything, I think what we’re talking about with inflation is a return to normalization.
  • Chris Molumphy: Our view is that inflation will continue to tick up, but very gradually. The primary forces that have really kept inflation muted to this point, primarily globalization and also technological innovation, are still in place and are likely to be here for a while. With respect to trade tensions, our view is that rhetoric often ends up being much more significant than underlying actions.

Host/Richard Banks: Hello and welcome to Talking Markets with Franklin Templeton Investments: exclusive and unique insights from Franklin Templeton.

I’m your host, Richard Banks. Ahead on this episode, talking trade tensions and the potential impact on global growth. Three of our senior investment leaders—Ed Perks, Chris Molumphy, and Stephen Dover—sit down with Franklin Templeton’s Katie Klingensmith. Katie, take it away.

Katie Klingensmith: I’d like to start with you, Ed. There have been a lot of concerns lately about economic activity globally. Do you see threats to our outlook for economic growth?

Ed Perks: Yeah, we do. You know, generally I think we are still in a good place. We think GDP growth globally is still accelerating, especially from where we’ve been in this economic cycle. That’s largely due to very strong growth in the United States, but also areas like Europe and Japan and emerging markets are still contributing nicely to growth. I would say, one of the bigger concerns that we have is some of the risks that might be associated with some of the trade tensions that certainly have been coming up to the surface a bit more of late. I think it’s important to acknowledge that fears of protectionism are not new. They’ve really been with us for a period of time here in this economic expansion.

If it were to materially impact, say business or consumer confidence, that could start to actually impact economic activity. We’re not really seeing that just yet. And then, obviously if we were to get to a point where we were to see significant activity in terms of tariffs, then it’d be a much more real impact. But right now we’re in a place where we still expect a pretty robust a period of economic growth, certainly in 2018.