What Franklin Templeton Thinks

Franklin Templeton comprises multiple independent investment teams located around the world. As individual portfolio managers and teams pursue different mandates, there will always be different views held on the markets and we consider that a strength. The insights below represent the current views of senior investment leaders and are subject to change.


  • Canadian economic data took a turn to the downside over the 4th quarter, with real GDP year-over-year falling from 2.1%as of August 2018 to 1.2% more recently. If excluding the consumer, residential real estate and government spending, growth would be negative.
  • Inflation in Canada remains a “show me” story despite a slight drift higher in headline inflation metrics over the quarter. Core inflation is close to 2%; right in the middle of the Bank of Canada’s 1%-3% target.
  • Canada has currently the highest policy rate of all developed markets. When combined with a strong Loonie, the high rate gives the Bank of Canada more tools to support the Canadian economy and consumer.


  • The U.S. and Canadian yield curves steepened over the quarter, with only the Canadian curve remaining inverted. The Canadian yield curve steepened, but only moved to flat overall and remains inverted out to 30 year and flat from overnight to 30 year given both have yields of 1.75%.
  • While Canadian bond yields could drift slightly higher over the near term, we expect them to remain largely range bound as Canadian macro fundamentals don’t support significantly higher interest rates.
  • We continue to favour corporate bonds as fundamentals remain fair but have preference for higher quality credits. We expect credit spreads to remain range-bound but acknowledge risks are growing to the downside.
  • With general weakness in U.S. Dollar (USD) vs. CAD over the quarter, we have increased the net USD allocation in our fixed income strategies that allow for foreign currency exposures.


  • Canadian equities have continued to demonstrate strong performance with 2019 being the strongest year since 2009. Despite strong general advances, the varied returns across sectors sends some mixed messages where investor confidence and caution conflict.
  • The S&P/TSX Composite Total Return Index experienced increased volatility in 2019, especially in the second half of the year. During this period market factors rotated from outperformance of momentum stocks to a general outperformance of quality and fundamental factors.
  • While low interest rates in isolation increase the attractiveness of equities, they have simultaneously contributed to an abundance of capital chasing a limited investment opportunity set.
  • Trade and geopolitical tensions remain elevated with implications for go-forward global growth dynamics. As much as risks and uncertainties cloud the near term, we can be certain that the future will bring threats and opportunities. We remain ready to take advantage of these dislocations as they present themselves.