A Continued Focus On Fixed Income Versus Equities

The longer-term risks of sticky inflation, monetary policy changes, and slowing economic growth continue to challenge the markets. Within this uncertain backdrop, Franklin Income Investors’ Ed Perks shares his latest outlook and the investment opportunities he sees across fixed income and equities.

Key takeaways:

  • Although the Federal Reserve’s (Fed’s) interest-rate hikes are starting to take effect, inflation remains sticky, and we expect the Fed will likely need more time to see how economic conditions evolve before it starts cutting rates.
  • Higher interest rates have led to recent bank failures and tighter lending conditions, which is helping the Fed achieve its inflation target but is not reflective of the banking sector as a whole.
  • We favor a 60/40 allocation, with a tilt toward fixed income over equity. We may further the shift toward fixed income incrementally as we find opportunities, particularly in investment-grade credit.
  • In this uncertain environment, we are cautious about equities and believe that broad exposure to different sectors is important.