Exhibit 1: Expectations for 2025 Based on the Franklin Templeton CIO Pulse Survey
Focus on Quality Across All Asset Classes
Source: Franklin Templeton CIO Survey expectations are for the end of 2025 and are as of October 2024.
*Assumed cuts are of 25 basis points in size. Survey methodology included at the end of the paper.
- The US fed funds rate will decrease from current level, ending 2025 around 3.6%. The CIOs expect at least five rate cuts* by the end of 2025.;
- Inflation, as measured by US core personal consumption expenditures (PCE), will fall to 2.4%. This is higher than the Fed and Bloomberg consensus estimate of 2.2%.;
- By the end of 2025, unemployment is expected to stay below the long-term average, rising modestly to 4.4%.
FAVOR
- Sector focus on technology, health care and financials.
- Small cap, S&P 500 Index and international (ex-US) indexes.
- S&P 500 Index will likely end 2025 around 5,800–6,000. Earnings will grow at 6.8%, versus the FactSet expectation of 14.9%.
- The 10-year US Treasury will end 2025 yielding approximately 3.75%.
- High-yield spreads will continue to modestly widen, from the current level of almost 300 bps to nearly 400 bps by the end of the year.
RISKS
- Earning below expectations, recession, geopolitics and fiscal policy.
WHAT ARE THE RISKS?
All investments involve risks, including possible loss of principal.
Equity securities are subject to price fluctuation and possible loss of principal
Fixed income securities involve interest rate, credit, inflation and reinvestment risks, and possible loss of principal. As interest rates rise, the value of fixed income securities falls. Changes in the credit rating of a bond, or in the credit rating or financial strength of a bond’s issuer, insurer or guarantor, may affect the bond’s value.
Low-rated, high-yield bonds are subject to greater price volatility, illiquidity and possibility of default.
Commodity-related investments are subject to additional risks such as commodity index volatility, investor speculation, interest rates, weather, tax and regulatory developments.
International investments are subject to special risks, including currency fluctuations and social, economic and political uncertainties, which could increase volatility. These risks are magnified in emerging markets.