Managing Challenges in US Equity and Fixed Income Markets Today

Coming out of the depths of the pandemic, US equity and fixed income markets are facing new challenges this year amid a rising interest rate environment and deceleration in growth. With this changing backdrop, Franklin Templeton Investment Solutions’ Ed Perks shares his latest outlook and the investment opportunities he sees across asset classes.

Key Points:

  • The US equity and fixed income markets are facing challenges due to a slowing US economy along with a significant pivot in monetary policy toward a more hawkish stance.
  • Combating inflation has become a priority, and investor focus has shifted toward the uncertain impact of rising interest rates on the economy and markets.
  • Despite challenges, US corporations are faring well so far in 2022, and the strength of the US labor market could delay or prevent a US recession.

Equity and Fixed Income Markets Facing Challenges

Looking back to the latter part of 2021, the US market environment was robust for equities, with strong economic growth that led to stock valuations that appeared appropriate to us. At the same time, the US Federal Reserve’s (Fed’s) accommodative environment—put in place during the pandemic—impacted fixed income markets.