around the world with franklin...
TRANSCRIPT
Around the World with Franklin Templeton
The information provided is not a complete analysis of every material fact regarding any country, region,
market, investment, or strategy. Because market and economic conditions are subject to change,
comments, opinions and analyses are rendered as of 1st March, 2017, and may change without notice.
Opinions are intended to provide insight on macroeconomic issues and commentary is not intended as
individual investment advice or a recommendation or solicitation to buy, sell or hold any security or to
adopt any investment strategy.
For Sophisticated Investor and Wholesale Client Use Only. Not for Distribution to Retail Clients.
A Global Perspective with Local Insight
Macroeconomic
Indicators
Global Fixed Income
Global Equity
Currency &
Commodities
Macroeconomic Indicators
Currency & CommoditiesGlobal EquityGlobal Fixed Income
GDP of Major Economies
Source: FactSet, International Monetary Fund. Important data provider notices and terms available at www.franklintempletondatasources.com. 3
Macroeconom
ic Indicators
Contribution to World GDP Growth: China & Rest of World
Calculations by Franklin Templeton’s Global Research Library with data sourced from FactSet, International Monetary Fund. Important data provider notices and terms available at
www.franklintempletondatasources.com. Estimates as of October 2016.
Macroeconom
ic Indicators
4
2017 Emerging Market GDP Growth Comparedto Developed Markets
*G7 composed of 7 countries: Canada, France, Germany, Italy, Japan, UK, and US. IMF estimates as of October 2016.
Source: FactSet, International Monetary Fund. Important data provider notices and terms available at www.franklintempletondatasources.com.
-4
-2
0
2
4
6
8
%
2017E Developed Markets
GDP Growth (G7*)
5
Macroeconom
ic Indicators
IMF Growth Projections (percent change over previous year, as of October 2016)
2000-2007
Average2015 2016E 2017E
World 4.49 3.20 3.08 3.44
United States 2.65 2.60 1.60 2.30
Euro Area 2.23 2.00 1.70 1.60
Japan 1.52 1.20 0.90 0.80
Emerging Economies 6.59 4.10 4.10 4.50
Developing Asia 8.33 6.70 6.30 6.40
China 10.51 6.90 6.70 6.50
Latin America 3.64 0.10 -0.70 1.20
MENA 5.90 2.10 3.20 3.16
GDP Forecasts
Source: FactSet, International Monetary Fund. Important data provider notices and terms available at www.franklintempletondatasources.com.
Macroeconom
ic Indicators
6
Central Bank’s Policy Rates
1 Source: FactSet, Bank of England, Federal Reserve System.
2 Source: FactSet, Eurostat, Bank of Japan, People’s Bank of China.
Important data provider notices and terms available at www.franklintempletondatasources.com.
9M
acroeconomic Indicators
7
-0.75
-0.65
-0.50
-0.40
-0.10
-0.8
-0.6
-0.4
-0.2
0
%
Switzerland - Target 3-Month LIBOR Rate Denmark - Monetary Policy Rate, Certificates Of Deposit
Sweden - Repo Rate Eurozone - ECB Deposit Rate
Japan - BoJ Uncollateralized Overnight Call Target Rate
Central Banks with Negative Interest RatesAs of February 20, 2017
Central Banks with Negative Interest Rates
Source: FactSet, Bank of Japan, Denmark National Bank, ECB - European Central Bank, Central Bank of Sweden, Swiss National Bank.
Important data provider notices and terms available at www.franklintempletondatasources.com.
Macroeconom
ic Indicators
8
-2%
-1%
0%
1%
2%
3%
Denmark Sweden Switzerland Eurozone United Kingdom
Change in Savings Rate After NIRP Implementation
Source: FactSet, Oxford Economics. *Deposit Facility Rate.
Important data provider notices and terms available at www.franklintempletondatasources.com.
Personal Savings Rate: Nominal ChangeDecember 31, 2013 – December 31, 2016
Date of NIRP Implementation:
ECB*: June 11, 2014
SNB: December 18, 2014
Riksbank: February 12, 2015
Macroeconom
ic Indicators
9
Global Easing is Now Being Driven by Japan and Europe
* Bank of England has made changes in the statistics reporting in September 2014.
Sources: Bloomberg, Federal Reserve, European Central Bank, Bank of England, Bank of Japan, People's Bank of China.
Important data provider notices and terms available at www.franklintempletondatasources.com. 10
Macroeconom
ic Indicators
0
100
200
300
400
500
600
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Ind
exed
to
100
(in
Lo
cal C
urr
ency
)
Central Banks: Total AssetsFrom January 2008 to January 2017
US (Fed) Eurozone (ECB) UK (BoE)* Japan (BoJ) China (PBoC)
1 Source: FactSet, S&P Dow Jones Indices, Federal Reserve.
2 Source: FactSet, Bank of Japan.
3 Source: FactSet, European Central Bank, MSCI.
Important data provider notices and terms available at www.franklintempletondatasources.com.
Central Bank Assets & Equity Markets
11
Macroeconom
ic Indicators
Unemployment Rate (%)
Source: FactSet, Spain: INE - Spanish National Statstical Institute; Italy: ISTAT - Italian National Statstical Institute; Eurozone: Eurostat; France: INSEE – France; Brazil: IBGE – Brazil;
Australia: ABS – Australia; Russia: Goskomstat of Russia; UK: ONS - UK Office for National Statstics; India: Oxford Economics; US: US Department of Labor; Germany: German
Federal Labour Office; China: National Bureau of Statistics of China; South Korea: Korean National Statistical Office; Japan: Ministry of Internal Affairs & Communications - Japan.
Important data provider notices and terms available at www.franklintempletondatasources.com.12
18.63
11.99 11.90
10.009.60
5.71 5.47 5.404.80 4.6
4.10 4.023.60
3.10
0
2
4
6
8
10
12
14
16
18
20
Spain(12/2016)
Italy(12/2016)
Brazil(11/2016)
France(12/2016)
Eurozone(12/2016)
Australia(11/2016)
India(12/2016)
Russia(11/2016)
UK(12/2016)
US(12/2016)
Germany(11/2016)
China(12/2016)
SouthKorea
(11/2016)
Japan(11/2016)
Unemployment Rate (%)
Macroeconom
ic Indicators
Debt Growth Has Outpaced Economic Growth Since the Mid-90’s
Global Non-Financial Debt vs. GDPDecember 31, 1960 – June 30, 2016
US
D T
rillio
ns
Calculations by Franklin Templeton’s Global Research Library with data sourced from Bank for International Settlements, World Bank, FactSet. Important data provider
notices and terms available at www.franklintempletondatasources.com.
Macroeconom
ic Indicators
13
0
20
40
60
80
100
120
140
160
180
1960
1962
1964
1966
1967
1969
1971
1973
1974
1976
1978
1980
1981
1983
1985
1987
1988
1990
1992
1994
1995
1997
1999
2001
2002
2004
2006
2008
2009
2011
2013
2015
Total Non-Financial Credit GDP at Market Prices
Japan
China
Euro Zone
US
UK
Germany
Australia
India
Canada
Russia
South Korea
Indonesia
France
Emerging Markets
Switzerland
Czech Republic
Vietnam
-15
-10
-5
0
5
10
15
20
45 47 49 51 53 55 57 59
Ch
ang
e o
ver
last
6 m
on
ths
Levels
Manufacturing Purchasing Managers’ Index
Source: FactSet, Markit. Important data provider notices and terms available at www.franklintempletondatasources.com.
Macroeconom
ic Indicators
Manufacturing Purchasing Managers’ Index (PMI)As of January 31, 2017
Contracting
14
Expanding
Manufacturing and Services PMI
Macroeconom
ic Indicators
Source: FactSet, Markit. Important data provider notices and terms available at www.franklintempletondatasources.com. 15
Industrial Production Index (YoY % change)
1 Source: FactSet, Federal Reserve System. 2 Source: FactSet, National Bureau of Statistics of China. 3 Source: FactSet, Eurostat. 4 Source: FactSet, UK Office for National Statistics.
5 Source: FactSet, Korean National Statistical Office. 6 Source: FactSet, METI-Ministry of Economy, Trade & Industry Japan.
Important data provider notices and terms available at www.franklintempletondatasources.com.
Macroeconom
ic Indicators
16
US Corporate Profits as a Share of GDP (%) and Wages & Labor Productivity
1 Source: FactSet, US Bureau of Economic Analysis.
2 Source: FactSet, US Department of Labor.
Important data provider notices and terms available at www.franklintempletondatasources.com.
Wages
Labor
Productivity
Macroeconom
ic Indicators
17
US Corporate Profits
Calculations by Franklin Templeton’s Global Research Library with data sourced from US Bureau of Economic Analysis.
Macroeconom
ic Indicators
18
US Corporate Profits, Nominal Quarterly Change (IVA Adjusted)Q3/2015 to Q3/2016
US
D B
illio
ns
-200
-150
-100
-50
0
50
100
150
Q3/2015 Q4/2015 Q1/2016 Q2/2016 Q3/2016
Domestic Corporate Profits Foreign Corporate Profits Total Corporate Profits
19
Japan Corporate Current Profits (SA)
June 1985 to September 2016
Source: Bloomberg, Ministry of Finance.
Important data provider notices and terms available at www.franklintempletondatasources.com.
Japan Corporate Profits are Near All Time Highs
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
18,000
20,000
1985 1988 1991 1994 1997 2000 2003 2006 2009 2012 2015
JPY
Bill
ion
Macroeconom
ic Indicators
20
Source: FactSet, Statistics Canada.
Important data provider notices and terms available at www.franklintempletondatasources.com.
Canadian Corporate Profits Were at All Time Highs in the Fourth Quarter of 2014
Macroeconom
ic Indicators
Mergers & Acquisitions Total Deal Value vs. Deal CountJanuary 1, 2005–December 31, 2016
21
Mergers & Acquisitions in the US
For illustrative and discussion purposes only
Source: Bloomberg.
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
9,000
10,000
0
400
800
1,200
1,600
2,000
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Deal C
ou
nt
Tota
l Dea
l Val
ue
(UD
S B
illio
ns)
Total Deal Value (LHS) Deal Count (RHS)
Macroeconom
ic Indicators
Consumer Prices Globally
1 Source: FactSet, US Department of Labor, National Bureau of Statistics of China, Eurostat.
2 Source: FactSet, International Monetary Fund, Ministry of Internal Affairs and Communications, UK Office for National Statistics.
Important data provider notices and terms available at www.franklintempletondatasources.com. 22
Macroeconom
ic Indicators
23
German Inflation Measures
* Total Industry excluding energy.
1 Source: FactSet, Deutsche Bundesbank, German Federal Statistical Office.
2 Source: FactSet, German Federal Statistical Office.
Important data provider notices and terms available at www.franklintempletondatasources.com.
Macroeconom
ic Indicators
US Consumer
1 Source: FactSet, US Bureau of Economic Analysis.
2 Source: FactSet, Federal Reserve System.
Important data provider notices and terms available at www.franklintempletondatasources.com.
Macroeconom
ic Indicators
24
US Housing
1 Source: FactSet, US Census Bureau, National Association of Realtors (NAR).
2 Source: FactSet, US Census Bureau.
Important data provider notices and terms available at www.franklintempletondatasources.com.
Macroeconom
ic Indicators
25
US Housing (Cont’d.)
1 Source: FactSet.
2 Source: FactSet, National Association of Realtors (NAR).
3 Source: FactSet, Federal Reserve System.
Important data provider notices and terms available at www.franklintempletondatasources.com. 26
Macroeconom
ic Indicators
Major Net Importers vs. Exporters
Source: FactSet, Oxford Economics. Important data provider notices and terms available at www.franklintempletondatasources.com.
Macroeconom
ic Indicators
27
0.7% 2.0% 2.4% 2.8%5.0% 5.1%
9.5% 10.5%14.6%
16.4%
26.2%
0%
10%
20%
30%
Who Gets Hurt by the Slowdown in China?
1 Source: FactSet, International Monetary Fund (IMF) World Economic Outlook, National Bureau of Statistics of China. Important data provider notices and terms available at
www.franklintempletondatasources.com.
2 Source: Bank for International Settlements (BIS).
Exports to China: % of GDP¹Exports: December 2015 to November 2016, GDP: 2017E
Foreign Banks’ Claims on Chinese Counterparties²As of Q2/2016, US$ Billions
Macroeconom
ic Indicators
28
8.5 14.6 20.0 26.8 27.936.3
45.4
67.776.4
140.9
0
50
100
150
200
Canada Switzerland Korea Germany Australia Taiwan France Japan U.S. UK
Macroeconomic Indicators
Global Fixed Income
Currency & CommoditiesGlobal Equity
0
2
4
6
8
10
12
14
16
18
Brazil Indonesia Malaysia Poland NewZealand
Australia US SouthKorea
Canada Sweden Eurozone Japan
%
Current ( 1/3/2017 ) One Year Ago ( 12/31/2015 )
10-Year Bond Yields
Source: FactSet, JP Morgan, Tullett Prebon Information. Important data provider notices and terms available at www.franklintempletondatasources.com.
10-Year Bond YieldsAs of 01/04/2017
Global F
ixed Income
30
Interest Rates Have Declined for Almost Three Decades
Source: FactSet, Tullett Prebon Information. Important data provider notices and terms available at www.franklintempletondatasources.com.
Global F
ixed Income
31
Government Bond Yields for Selected European Countries
Government Bond Yields as of February 21, 2017
Source: Bloomberg.
Global F
ixed Income
32
1YR 2YRS 3YRS 4YRS 5YRS 6YRS 7YRS 8YRS 9YRS 10YRS
Switzerland -0.98 -0.99 -0.89 -0.80 -0.67 -0.56 -0.42 -0.31 -0.23 -0.15
Germany -0.87 -0.86 -0.77 -0.64 -0.48 -0.35 -0.20 -0.03 0.14 0.32
Finland -0.67 -0.70 -0.65 -0.47 -0.19 -0.14 0.06 0.14 0.40 0.51
Netherland -0.73 -0.78 -0.69 -0.58 -0.29 -0.09 0.14 0.33 0.49 0.65
Austria -0.71 -0.72 -0.65 -0.54 -0.34 -0.12 0.04 0.24 0.42 0.62
Belgium -0.60 -0.52 -0.44 -0.33 -0.13 0.01 0.29 0.53 0.69 0.86
France -0.54 -0.44 -0.25 -0.06 0.17 0.25 0.42 0.64 0.89 1.10
Ireland -0.45 -0.41 -0.33 -0.24 0.13 0.36 0.62 0.86 1.09
Sweden -0.63 -0.32 -0.04 0.21 0.43 0.66
Italy -0.25 0.01 0.33 0.53 0.94 1.26 1.59 1.89 1.97 2.20
Spain -0.28 -0.27 -0.13 0.12 0.31 0.75 0.97 1.29 1.51 1.63
Calculations by Franklin Templeton’s Global Research Library with data sourced from Bloomberg.
Global F
ixed Income
33
Bloomberg Global Developed Sovereign Bond Index: Market ValueAs of February 21, 2017
Yield to Maturity
US
D T
rillio
ns
Almost $6 Trillion of Negative-Yielding Sovereign Bonds and $13 Trillion under 1%
0
2
4
6
8
Less Than Zero Zero to 1% 1% to 2% More than 2%
Barclays US High Yield: 1-Year Change
Source: FactSet, Barclays. Important data provider notices and terms available at www.franklintempletondatasources.com.
Global F
ixed Income
34
Global F
ixed Income
Source: FactSet. Important data provider notices and terms available at www.franklintempletondatasources.com.
Some Shorter-Term Corporate Bonds Now Have Negative Yields
35
Yield Curve Is Compressing, but Still Not Inverted
Source: FactSet, Tullett Prebon Information. Important data provider notices and terms available at www.franklintempletondatasources.com. 36
Global F
ixed Income
Yield Spreads
Source: FactSet, BofA Merrill Lynch. Important data provider notices and terms available at www.franklintempletondatasources.com.
Global F
ixed Income
37
Global Equity
Macroeconomic Indicators Currency & CommoditiesGlobal Fixed Income
Global Market Capitalization
Calculations by Franklin Templeton’s Global Research Library with data sourced from Bloomberg.
Note: Global market capitalization data does not include ETFs and ADRs as they do not directly represent companies. It includes only actively traded, primary securities on the
country’s exchanges to avoid double counting.
$66.8 Trillion as of 12/31/2016
US, 38%
Canada, 3%
Europe (Developed), 18%
Japan, 8%
Asia/Pacific ex-Japan, 26%
Brazil, 1%
Rest of the World, 4% Middle East, 2%
Global E
quity
39
Global GDP 2016 IMF Forecast vs. Market Cap December 2016
*Developed Markets consists of 23 countries: Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany, Hong Kong, Ireland, Israel, Italy, Japan, Netherlands, New
Zealand, Norway, Portugal, Singapore, Spain, Sweden, Switzerland, UK and US.
**Emerging Markets consists of 23 countries: Brazil, Chile, China, Colombia, Czech Republic, Egypt, Greece, Hungary, India, Indonesia, South Korea, Malaysia, Mexico, Peru,
Philippines, Poland, Qatar, Russia, South Africa, Taiwan, Thailand, Turkey and United Arab Emirates.
1 Calculations by Franklin Templeton’s Global Research Library with data sourced from FactSet, International Monetary Fund.
2 Calculations by Franklin Templeton’s Global Research Library with data sourced from Bloomberg.
Important data provider notices and terms available at www.franklintempletondatasources.com.
57%33%
10%
Developed & Emerging MarketsGDP as a % of World GDP1
2016 Forecast
Developed Markets*
Emerging Markets**
Rest of the World
75.3%
22.2%
2.4%
Developed & Emerging Markets Market Cap as a % of World Market Cap2
As of December 31, 2016
Global E
quity
40
38%
47%
15%
Developed & Emerging MarketsGDP as a % of World GDP1
2016 Forecast
Developed Markets*
Emerging Markets**
Rest of the World
Global GDP Based on PPP*** 2016 IMF Forecast vs. Market Cap December 2016
*Developed Markets consists of 23 countries: Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany, Hong Kong, Ireland, Israel, Italy, Japan, Netherlands, New
Zealand, Norway, Portugal, Singapore, Spain, Sweden, Switzerland, UK and US.
**Emerging Markets consists of 23 countries: Brazil, Chile, China, Colombia, Czech Republic, Egypt, Greece, Hungary, India, Indonesia, South Korea, Malaysia, Mexico, Peru,
Philippines, Poland, Qatar, Russia, South Africa, Taiwan, Thailand, Turkey and United Arab Emirates.
***Purchasing Power Parity
1 Calculations by Franklin Templeton’s Global Research Library with data sourced from FactSet, International Monetary Fund.
2 Calculations by Franklin Templeton’s Global Research Library with data sourced from Bloomberg.
Important data provider notices and terms available at www.franklintempletondatasources.com.
75.3%
22.2%
2.4%
Developed & Emerging Markets Market Cap as a % of World Market Cap2
As of December 31, 2016
Global E
quity
41
0%
5%
10%
15%
20%
25%
30%
MSCI All Country World: Sector Weights (15 Years)
Source: FactSet, MSCI. MSCI makes no warranties and shall have no liability with respect to any MSCI data reproduced herein. No further redistribution or use is permitted. This
report is not prepared or endorsed by MSCI. Important data provider notices and terms available at www.franklintempletondatasources.com.
From 12/31/2001 to 12/31/2016
Global E
quity
High-Low Range Current Mean
42
0%
20%
40%
60%
80%
100%
1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015
Sector Weights
Source: FactSet, MSCI. MSCI makes no warranties and shall have no liability with respect to any MSCI data reproduced herein. No further redistribution or use is permitted.
This report is not prepared or endorsed by MSCI. Important data provider notices and terms available at www.franklintempletondatasources.com.
Average Current
Real Estate 3% 3%
Energy 8% 7%
Materials 6% 5%
Industrials 11% 11%
Consumer Disc. 12% 12%
Consumer Staples 9% 10%
Health Care 11% 12%
Financials 21% 18%
Technology 12% 15%
Telecom 5% 3%
Utilities 4% 3%
MSCI World Sector WeightsJanuary 1995 – December 2016
Weig
ht
%
43
Global E
quity
Equity Performance Post Fed Rate Hikes
Source: FactSet, S&P Dow Jones Indices, as of 02/17/2017. Important data provider notices and terms available at www.franklintempletondatasources.com.
Global E
quity
44
-5%
0%
5%
10%
15%
Three-Year Average Cumulative Price Return Following Fed TighteningS&P 500 Index, Since March 1, 1971
Nine Tightening Periods: 1971, 1976, 1983, 1987, 1994, 1999, 2004, 2015 and 2016
Year 1 Year 2 Year 3
Price Relative to MSCI AC World Index Local Currency
Source: FactSet, MSCI. MSCI makes no warranties and shall have no liability with respect to any MSCI data reproduced herein. No further redistribution or use is permitted.
This report is not prepared or endorsed by MSCI. Important data provider notices and terms available at www.franklintempletondatasources.com.
Global E
quity
45
Emerging Markets Outperformed for 10 Years
Source: FactSet, MSCI. MSCI makes no warranties and shall have no liability with respect to any MSCI data reproduced herein. No further redistribution or use is permitted. This report
is not prepared or endorsed by MSCI. Important data provider notices and terms available at www.franklintempletondatasources.com.
Global E
quity
46
Value’s Recent Underperformance Is Comparable to the Tech Bubble
Global E
quity
47
Source: FactSet, MSCI. MSCI makes no warranties and shall have no liability with respect to any MSCI data reproduced herein. No further redistribution or use is permitted. This report
is not prepared or endorsed by MSCI. Important data provider notices and terms available at www.franklintempletondatasources.com.
Value and Growth Drivers
Source: FactSet, MSCI. Important data provider notices and terms available at www.franklintempletondatasources.com.
Blue: Value Drivers
Green: Growth Drivers
Global E
quity
48
Country Performance: YTD Total Returns
All returns assume reinvestments of dividends and capital gains. The index is unmanaged, and one cannot invest directly in an index.
Past performance does not guarantee future results.
Source: FactSet, MSCI. MSCI makes no warranties and shall have no liability with respect to any MSCI data reproduced herein. No further redistribution or use is permitted. This report
is not prepared or endorsed by MSCI. Important data provider notices and terms available at www.franklintempletondatasources.com.
Global E
quity
49
-6
-4
-2
0
2
4
6
8
10
MS
CI A
C W
orl
d
Bra
zil
New
Zea
lan
dH
on
g K
on
gP
hili
pp
ines
Ko
rea
Sin
gap
ore
Po
lan
dC
hin
aA
ust
ralia
Qat
arP
eru
Un
ited
Ara
b E
mir
ates
No
rway
Ch
ileA
ust
ria
Hu
ng
ary
So
uth
Afr
ica
Co
lom
bia
Ind
iaT
aiw
anM
alay
sia
Jap
anG
erm
any
Can
ada
Th
aila
nd
Den
mar
kS
wit
zerl
and
Un
ited
Sta
tes
Net
her
lan
ds
Sp
ain
Ind
on
esia
Sw
eden
Ital
yP
ort
ug
alF
ran
ceU
nit
ed K
ing
do
mF
inla
nd
Cze
ch R
epu
blic
Irel
and
Isra
elB
elg
ium
Eg
ypt
Gre
ece
Ru
ssia
Tu
rkey
Mex
ico
MSCI AC World Index (% change)As of 01/20/2017 (in US Dollars)
Country Cumulative Performance: Total Return
All returns assume reinvestments of dividends and capital gains. The index is unmanaged, and one cannot invest directly in an index.
Past performance does not guarantee future results.
Source: FactSet, MSCI. MSCI makes no warranties and shall have no liability with respect to any MSCI data reproduced herein. No further redistribution or use is permitted.
This report is not prepared or endorsed by MSCI. Important data provider notices and terms available at www.franklintempletondatasources.com.
Global E
quity
-100
-50
0
50
100
150
200
MS
CI A
C W
orl
d
Un
ited
Ara
b E
mir
ates
Bel
giu
mU
nit
ed S
tate
sD
enm
ark
New
Zea
lan
dF
inla
nd
Irel
and
Net
her
lan
ds
Ger
man
yP
hili
pp
ines
Hu
ng
ary
Fra
nce
Ho
ng
Ko
ng
Sw
itze
rlan
dT
aiw
anJa
pan
Sw
eden
Eg
ypt
Ind
iaT
hai
lan
dC
hin
aQ
atar
Au
stra
liaU
nit
ed K
ing
do
mA
ust
ria
Ital
yK
ore
aS
ing
apo
reC
anad
aS
pai
nIs
rael
So
uth
Afr
ica
Ru
ssia
No
rway
Per
uIn
do
nes
iaP
ola
nd
Mex
ico
Tu
rkey
Mal
aysi
aP
ort
ug
alC
zech
Rep
ub
licC
hile
Bra
zil
Co
lom
bia
Gre
ece
MSCI AC World Index 5Yr Cumulative Total Return (% change)From 12/30/2011 to 12/31/2016 (in US Dollars)
50
World Market Performance
Returns in US$
1 Source: FactSet, MSCI. MSCI makes no warranties and shall have no liability with respect to any MSCI data reproduced herein. No further redistribution or use is permitted. This
report is not prepared or endorsed by MSCI.
2 Source: FactSet, S&P Dow Jones Indices.
Important data provider notices and terms available at www.franklintempletondatasources.com.
Global E
quity
51
Why You Should Diversify
Rankings based on the countries in the MSCI All Country World Index. As of December 31, 2016 there were 46 countries in the index; on average since 1989 there were 42 countries.
Performance measured in US$; total return (gross dividends are reinvested). Past performance cannot guarantee future results.
Source: FactSet, MSCI. MSCI makes no warranties and shall have no liability with respect to any MSCI data reproduced herein. No further redistribution or use is permitted.
This report is not prepared or endorsed by MSCI. Important data provider notices and terms available at www.franklintempletondatasources.com.
Top 3 Equity Markets
1st 2nd 3rd US
1989 Thailand Austria Greece 18th
1990 Greece Mexico Chile 11th
1991 Argentina Brazil Mexico 8th
1992 Jordan Philippines Thailand 8th
1993 Turkey Philippines Hong Kong 31st
1994 Brazil Finland Chile 19th
1995 Switzerland US Sweden 2nd
1996 Venezuela Poland Brazil 17th
1997 Turkey Hungary Mexico 10th
1998 South Korea Finland Greece 9th
1999 Turkey Russia Finland 25th
2000 Israel Switzerland Canada 18th
2001 Russia South Korea Colombia 22nd
2002 Pakistan Czech Republic Indonesia 38th
2003 Thailand Turkey Brazil 47th
2004 Colombia Egypt Hungary 43rd
2005 Egypt Colombia Jordan 42nd
2006 China Indonesia Morocco 40th
2007 Peru Brazil Turkey 42nd
2008 Morocco Colombia Israel 7th
2009 Brazil Indonesia Russia 38th
2010 Thailand Peru Chile 22nd
2011 Ireland Indonesia New Zealand 4th
2012 Turkey Philippines Egypt 29th
2013 Greece Finland Ireland 4th
2014 Egypt Indonesia Philippines 8th
2015 Hungary Denmark Ireland 13th
2016 Brazil Russia Peru 17th
Global E
quity
52
0.0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
Ave
rag
e R
-Sq
uar
eGlobal Correlations
Calculations by Franklin Templeton’s Global Research Library with data sourced from FactSet, MSCI. Important data provider notices and terms available at
www.franklintempletondatasources.com.
One-Year Rolling Correlation in Weekly Price Change of 45 Markets
against the MSCI AC World IndexThrough 01/13/2017
53
Global E
quity
0
10
20
30
40
50
60
70
80
Global Price to Earnings
Price to Earnings (LTM) for Selected MSCI Indexes, Last 15 YearsFrom 12/30/2001 to 12/31/2016
More
Expensive
Less
Expensive
High: 109.71
Source: FactSet, MSCI. MSCI makes no warranties and shall have no liability with respect to any MSCI data reproduced herein. No further redistribution or use is permitted.
This report is not prepared or endorsed by MSCI. Important data provider notices and terms available at www.franklintempletondatasources.com.
Global E
quity
High-Low Range Current Mean
54
0
1
2
3
4
5
6
Global Trailing Price-to-Book Value
Source: FactSet, MSCI. MSCI makes no warranties and shall have no liability with respect to any MSCI data reproduced herein. No further redistribution or use is permitted.
This report is not prepared or endorsed by MSCI. Important data provider notices and terms available at www.franklintempletondatasources.com.
Price-to-Book Value (LTM) for Selected MSCI Indexes, Last 15 yearsFrom 12/30/2001 to 12/31/2016
Global E
quity
More
Expensive
Less
Expensive
High-Low Range Current Mean
55
0
5
10
15
20
25
30
35
De
nm
ark
US
A
Jap
an
Be
lgiu
m
MS
CI
Wo
rld
In
dex
Ne
the
rla
nd
s
Ca
na
da
Sw
itze
rla
nd
Ire
lan
d
Ne
w Z
eala
nd
Sw
ed
en
Germ
an
y
Fra
nc
e
Au
str
alia
Fin
lan
d
Ho
ng
Ko
ng
Un
ite
d K
ing
do
m
Isra
el
Sin
ga
po
re
No
rway
Ita
ly
Sp
ain
Au
str
ia
Po
rtu
ga
l
Developed Markets: CAPE12/30/2016As of
Cyclically Adjusted Price-to-Earnings (CAPE) for Developed Markets
Global E
quity
56
Not inflation adjusted, in local currency.
Calculations by Franklin Templeton’s Global Research Library with data sourced from FactSet, MSCI. Important data provider notices and terms available at
www.franklintempletondatasources.com.
Cyclically Adjusted Price-to-Earnings (CAPE) for Emerging Markets
Global E
quity
57
Not inflation adjusted, in local currency.
Calculations by Franklin Templeton’s Global Research Library with data sourced from FactSet, MSCI. Important data provider notices and terms available at
www.franklintempletondatasources.com.
0
5
10
15
20
25
30
35
Eg
yp
t
Me
xic
o
Ph
ilip
pin
es
Ind
ia
So
uth
Afr
ica
Ind
on
es
ia
Ta
iwan
Co
lom
bia
Ch
ile
Th
ail
an
d
Ma
lays
ia
Pe
ru
UA
E
MS
CI
EM
In
de
x
Qata
r
Hu
ng
ary
Bra
zil
So
uth
Ko
rea
Tu
rke
y
Ch
ina
Po
lan
d
Ru
ss
ia
Cze
ch
Re
pu
blic
Gre
ec
e
Emerging Markets: CAPE12/30/2016As of
Last 12 Months Price-to-Earnings Ratio for Selected MSCI Indexes
MSCI Price-to-Earnings Ratio (Trailing)As of December 31, 2016
Bar Colors Show Weights
Calculations by Franklin Templeton’s Global Research Library with data sourced from FactSet, MSCI. Important data provider notices and terms available at
www.franklintempletondatasources.com.
Global E
quity
58
10.9x
13.0x14.3x
17.5x 17.7x18.6x 19.0x
19.8x21.0x
21.9x23.2x
24.1x
27.5x
0
5
10
15
20
25
30
0
5
10
15
20
25
30
Ko
rea
Ch
ina
EM
Sp
ain
Jap
an
Bra
zil
Au
stra
lia
Ind
ia
Fra
nce
Wo
rld
US
Can
ada
UK
P/E
Real Estate Utilities Telecom Services Information Technology
Financials Health Care Consumer Staples Consumer Discretionary
Industrials Materials Energy
0
3
6
9
12
US Sector Valuations: Trailing Price-to-Book Value
MSCI US Index: Price-to-Book Value, Last 15 Years From 12/31/2001 to 12/31/2016
Source: FactSet, MSCI. MSCI makes no warranties and shall have no liability with respect to any MSCI data reproduced herein. No further redistribution or use is permitted.
This report is not prepared or endorsed by MSCI. Important data provider notices and terms available at www.franklintempletondatasources.com.
Global E
quity
More
Expensive
Less
Expensive
High-Low Range Current Mean
59
Europe Sector Valuations: Trailing Price-to-Book Value
0
2
4
6
8
MSCI Europe Index: Price-to-Book Value, Last 15 Years From 12/31/2001 to 12/31/2016
Source: FactSet, MSCI. MSCI makes no warranties and shall have no liability with respect to any MSCI data reproduced herein. No further redistribution or use is permitted.
This report is not prepared or endorsed by MSCI. Important data provider notices and terms available at www.franklintempletondatasources.com.
Global E
quity
More
Expensive
Less
Expensive
High-Low Range Current Mean
60
Global Sector Valuations: Trailing Price-to-Book Value
MSCI AC World Index: Price-to-Book Value, Last 15 Years From 12/31/2001 to 12/31/2016
0
2
4
6
8
Source: FactSet, MSCI. MSCI makes no warranties and shall have no liability with respect to any MSCI data reproduced herein. No further redistribution or use is permitted.
This report is not prepared or endorsed by MSCI. Important data provider notices and terms available at www.franklintempletondatasources.com.
Global E
quity
More
Expensive
Less
Expensive
High-Low Range Current Mean
61
1%
2%
3%
4%
5%
6%
7%
8%
Q1-9
9Q
4-9
9Q
3-0
0Q
2-0
1Q
1-0
2Q
4-0
2Q
3-0
3Q
2-0
4Q
1-0
5Q
4-0
5Q
3-0
6Q
2-0
7Q
1-0
8Q
4-0
8Q
3-0
9Q
2-1
0Q
1-1
1Q
4-1
1Q
3-1
2Q
2-1
3Q
1-1
4Q
4-1
4Q
3-1
5Q
2-1
6
S&P 500 Index: Dividends, Buybacks & Capex
S&P 500 12-Month Trailing Buyback
and Dividend Yield
How Companies Spend Their CashS&P 500 Uses of Cash
62
For illustrative and discussion purposes only. Source: FactSet. Data compiled on January 12, 2017. See www.franklintempletondatasources.com for additional data provider information.
As of December 31, 2015 As of September 30, 2016
0
100
200
300
400
500
600
700
800
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
$ B
illi
on
s
Dividends Buybacks Capex
S&P 500: Magnitude of Bull & Bear Markets
Bull & Bear Markets Defined as 20% Reversals in the S&P 500 Index (from the low data to the highest and vice versa). Calculated from the highest to the low point and vise
versa. The end of the current bull market has not been yet defined.
Calculations by Franklin Templeton’s Global Research Library with data sourced from FactSet, S&P Dow Jones Indices. Important data provider notices and terms available
at www.franklintempletondatasources.com.
Current Bull Market Is One of the Strongest in History December 31, 2016
Cu
mu
lati
ve
Retu
rn %
Global E
quity
63
-100%
0%
100%
200%
300%
400%
500%
1928 1932 1933 1935 1938 1942 1948 1962 1970 1974 1982 1987 2002 2009
Preceding Decline Cumulative Return Average Appreciation Average Decrease
Market Volatility
Source: FactSet, CBOE. Important data provider notices and terms available at www.franklintempletondatasources.com.
Global E
quity
64
Small-Cap Stocks vs. Large Caps
1 Source: FactSet, S&P Dow Jones Indices, Russell Investment Group. Russell Investment Group is the source and owner of the trademarks, service marks and copyrights
related to the Russell Indexes. Russell® is a trademark of Russell Investment Group.
2 Source: FactSet, MSCI. MSCI makes no warranties and shall have no liability with respect to any MSCI data reproduced herein. No further redistribution or use is permitted. This
report is not prepared or endorsed by MSCI.
Important data provider notices and terms available at www.franklintempletondatasources.com.
Global E
quity
65
Currency & Commodities
Macroeconomic Indicators Global Fixed Income Global Equity
Currencies Performance vs the US Dollar
Data as on January 13, 2017.
Source: FactSet. Important data provider notices and terms available at www.franklintempletondatasources.com.
Currencies &
Com
modities
67
4.12%
2.65%2.52%
1.13% 1.04% 0.97%
0.65%
-0.25%-0.5%
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
3.5%
4.0%
4.5%
AustralianDollar
South KoreanWon
Canadian Dollar EURO Brazil Real Swiss Franc Chinese Yuan Indian Rupee
2017 YTD Percentage Returns of Currencies vs US Dollar
Commodities Year-to-Date Performance
Currencies &
Com
modities
Commodities YTD Returns As of January 13, 2017
Source: FactSet, Commodity Research Bureau, Dow Jones & Company, London Platinum & Palladium Market, London Metal Exchange, US Department of Agriculture.
Important data provider notices and terms available at www.franklintempletondatasources.com. 68
-3% -3%
-9%
13%
9%
4% 3%
6% 5%4%
1% 0%
6%
4%
2%
-15%
-10%
-5%
0%
5%
10%
15%
Cru
de
Oil
Co
al
Nat
ura
l Gas
(Hen
ry H
ub
)
Pal
lad
ium
Pla
tin
um
Go
ld
Silv
er
Zin
c
Co
pp
er
Alu
min
um
Nic
kel
Tin
Wh
eat
So
ybea
n
Co
rn
Energy Precious Metals Industrial Metals Agriculture
Value of Trade-Weighted US Dollar
Source: FactSet, Federal Reserve System. Important data provider notices and terms available at www.franklintempletondatasources.com.
Currency Trends Have Historically Lasted Several Years
Currencies &
Com
modities
69
US Dollar per Euro (EURUSD)
1 Source: FactSet, WM/Reuters.
2 Source: FactSet, Oxford Economics.
Important data provider notices and terms available at www.franklintempletondatasources.com.
Currencies &
Com
modities
70
Japanese Yen per US Dollar (USDJPY)
1 Source: FactSet, WM/Reuters.
2 Source: FactSet, Oxford Economics.
Important data provider notices and terms available at www.franklintempletondatasources.com.
Currencies &
Com
modities
71
US Dollar per British Pound (GBPUSD)
1 Source: FactSet, WM/Reuters.
2 Source: FactSet, Oxford Economics.
Important data provider notices and terms available at www.franklintempletondatasources.com.
Currencies &
Com
modities
72
US Dollar per Australian Dollar (AUDUSD)
1 Source: FactSet, WM/Reuters.
2 Source: FactSet, Oxford Economics.
Important data provider notices and terms available at www.franklintempletondatasources.com.
Currencies &
Com
modities
73
British Pound per Euro (EURGBP)
1 Source: FactSet, WM/Reuters.
2 Source: FactSet, Oxford Economics.
Important data provider notices and terms available at www.franklintempletondatasources.com.
Currencies &
Com
modities
74
Energy Prices
Sources: FactSet, Dow Jones & Company, Commodity Research Bureau. Important data provider notices and terms available at www.franklintempletondatasources.com.
Natural Gas (Henry Hub) as of 02/17/17
Latest 2.75
1 Month (% Chg) -18.40
3 Months (% Chg) 16.03
6 Months (% Chg) -0.36
YTD (% Chg) -25.88
1 Year (% Chg) 42.49
5 Years (Cumulative % Chg) 2.80
Currencies &
Com
modities
WTI Crude Oil as of 02/17/17
Latest 53.43
1 Month (% Chg) 1.87
3 Months (% Chg) 17.77
6 Months (% Chg) 14.14
YTD (% Chg) -0.60
1 Year (% Chg) 74.15
5 Years (Cumulative % Chg) -48.25
75
Gold
*Log Scale
Sources: FactSet, Dow Jones & Company, US Department of Labor. Important data provider notices and terms available at www.franklintempletondatasources.com.
2/17/2017 Latest
(% Chg)
1 Month
(% Chg)
3 Months
(% Chg)
6 Months
(% Chg)
YTD
(% Chg)
1 Year
(Cumulative % Chg)
5 Years
Gold 1241.95 2.13 1.24 -7.55 8.38 2.64 -27.92
Currencies &
Com
modities
76
Aluminium & Silver
*Log Scale
Sources: FactSet, London Metal Exchange, Dow Jones & Company. Important data provider notices and terms available at www.franklintempletondatasources.com.
17-Feb-17
Latest 18.01
1 Month (% Chg) 5.91
3 Months (% Chg) 5.66
6 Months (% Chg) -8.00
YTD (% Chg) 10.87
1 Year (% Chg) 18.07
5 Years (Cumulative % Chg) -46.22
17-Feb-17
Latest 1865.50
1 Month (% Chg) 3.32
3 Months (% Chg) 10.22
6 Months (% Chg) 10.68
YTD (% Chg) 8.87
1 Year (% Chg) 22.73
5 Years (Cumulative % Chg) -12.31
Currencies &
Com
modities
77
200
400
600
800
1,000
1,200
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
$/tn
Steel 2
(Spot USD/Tonne)From 09-May-06 to 20-Feb-Jan-17 (Daily)
Copper & Steel
1 Source: FactSet, London Metal Exchange. Important data provider notices and terms available at www.franklintempletondatasources.com.
2 Source: Bloomberg.
17-Feb-17
Latest 5,939.00
1 Month (% Chg) 2.90
3 Months (% Chg) 9.45
6 Months (% Chg) 24.89
YTD (% Chg) 7.96
1 Year (% Chg) 30.18
5 Years (Cumulative % Chg) -29.04
Currencies &
Com
modities
78
Latest 622
1 Month (% Chg) 2.98
3 Months (% Chg) 23.41
6 Months (% Chg) 4.36
YTD (% Chg) 5.78
1 Year (% Chg) 55.11
5 Years (Cumulative % Chg) -14.56
02/20/2017
LME Metals Index
Industrial Metals Prices (Aluminium, Copper, Lead, Nickel, Tin, Zinc)
50
100
150
200
250
300
350
400
450
500
56 59 62 65 68 71 74 77 80 83 86 89 92 95 98 01 04 07 10 13 16
Ind
ex
Reuters/Jefferies CRB® Index (1967=100)2
From September 30, 1956 to January 31, 2017 (Monthly close; US$)
1 Source: FactSet, London Metal Exchange. Important data provider notices and terms available at www.franklintempletondatasources.com.
2 Source: Bloomberg.
Currencies &
Com
modities
79
For Sophisticated Investor and Wholesale Client Use Only. Not for Distribution to Retail Clients.
Franklin Templeton Investments Australia Fund Range
FIXED INCOME
• Franklin Templeton Multisector Bond Fund
• Templeton Global Bond Plus Fund
• Franklin Templeton Global Aggregate Bond Fund
• Franklin Australian Absolute Return Bond Fund
EQUITY
• Franklin Global Growth Fund
• Franklin Templeton Australian Equity Fund
• Templeton Global Equity Fund
80
For Sophisticated Investor and Wholesale Client Use Only. Not for Distribution to Retail Clients.
Franklin Templeton Investments Australia Limited (ABN 87 006 972 247) (Australian Financial Services Licence Holder No.
225328) issues this publication for the benefit of the category of person described below for information purposes only and
not investment or financial product advice. It is not addressed to any other person and may not be used by them for any
purpose whatsoever. It expresses no views as to the suitability of the services or other matters described herein to the
individual circumstances, objectives, financial situation, or needs of any recipient. A disclosure document for any Franklin
Templeton funds referred to in this document is available from Franklin Templeton at Level 19, 101 Collins Street,
Melbourne, Victoria, 3000 or www.franklintempleton.com.au, or by calling 1800 673 776. The disclosure document should be
considered before making an investment decision.
Any research and analysis contained in this presentation has been procured by Franklin Templeton for its own purposes and
may be acted upon in that connection and, as such, is provided to you incidentally. Any views expressed are the views of
the fund manager and do not constitute investment advice. The underlying assumptions and these views are subject to
change. Franklin Templeton accepts no liability whatsoever for any direct or indirect consequential loss arising from the use
of this commentary or any information, opinion or estimate herein. The value of investments and the income from them can
go down as well as up and you may not get back the full amount that you invested. Past performance is not an indicator nor
a guarantee of future performance. Any prediction, projection or forecast on the economy, stock market, bond market or the
economic trends of the markets is not necessarily indicative of the future or likely performance.
© 2017 Franklin Templeton Investments. All rights reserved. You may only reproduce, circulate and use this document (or
any part of it) with the consent of Franklin Templeton Investments.
www.franklintempleton.com.au
Important Information
81
For Sophisticated Investor and Wholesale Client Use Only. Not for Distribution to Retail Clients. ATW AUS PPT 03/17
Franklin Templeton Investments Australia Limited
Level 19
101 Collins Street
Melbourne VIC 3000
Australia
Level 30, Aurora Place
88 Phillip Street
Sydney NSW 2000
Australia
tel 1800 673 776
www.franklintempleton.com.au
email: [email protected]
82