The global market outlook is already hazy in light of the COVID-19 pandemic, and the upcoming US presidential election adds another layer of uncertainty. In this excerpt from our Midyear Global Investment Outlook, Sonal Desai, Stephen Dover, Michael Hasenstab and Ed Perks offer their views of today’s investment landscape, including the upcoming US elections and economic outlook.


Sonal Desai, Ph.D.

Chief Investment Officer,
Franklin Templeton Fixed Income

Various prognosticators have attempted to predict the type of economic recovery we may see—a sharp “V-shaped” rebound from the bottom, or slower “U-shaped” recovery or an “L-shaped” where we linger longer in the depths. To some extent, the type of recovery we see depends on whether one is talking about sequential growth or annualized growth in sequential terms. Right now, we are sticking with our baseline under which, on quarter-over-quarter annualized terms, we should see quite a sharp recovery. Whatever letter you use to describe it, I do think that we could see the sharpest and potentially the shortest recession in US history. It is cliché to say, but we are in unprecedented times.

The United States is currently going through a period of what I would call intense soul-searching, long overdue and much needed. Unfortunately, times like this also lead to what I would call political opportunism. We are certainly seeing that on every side. Looking through the recent, quite tragic events in the United States, and going forward into the latter half of the year, we need to recognize that the US elections are still four months away. While the polls seem to be showing the Democrats are out in front, a lot can change. Let us remember that the economy was roaring five months ago.

Even without a full Democratic or Republican sweep in November, it is hard to overstate the level of uncertainty in regard to what the likely path of policy will be. Over the next several months, we will get greater detail on what the policy platform of the Democratic presidential and vice-presidential candidates will be, which should help shape our outlook on different sectors. On the Republican side, in the case of a sweep, the outlook is more known. And if it’s not a sweep—if we have a president who is of a different party than the Congressional majority—any incoming administration will find it hard to dramatically change policies.

So, putting it into perspective, over the next few months we will have much greater detail on what the policy platforms will be and as the polls become clearer, we will have views as to how the market impact will play out.

Overall, we believe it is a time to be active as investors. There is not a single asset that is unilaterally a buy right now, in our view. More than ever, selectivity by country, by sector, by asset class, and within asset classes by industry and individual companies is required. The importance of thoughtful, skilled bottom-up research cannot be emphasized enough in the current environment.

The risks to the economic outlook are very real. Our baseline outlook assumes sensible reactions as we are looking at data-driven conclusions as opposed to just knee-jerk reactions.