Portfolio Outlook and Update
A larger investment team with enhanced research powers
Franklin Global Trust is a new name for the Martin Currie Global Portfolio Trust, and the new name reflects some exciting developments. The Trust’s investment team are to align with Franklin Equity Group (FEG). They offer in-depth expertise in managing global, U.S. and sector-specific strategies. We will benefit from a larger global research platform, joining another 65 investment professionals.
FEG’s Silicon Valley based team are at the centre of innovation, this strengthens our ability to uncover quality growth opportunities in transformative sectors like technology, healthcare, and beyond.
FEG’s Silicon Valley based team are at the centre of innovation, this strengthens our ability to uncover quality growth opportunities in transformative sectors like technology, healthcare, and beyond.”
The markets this year have been dominated by the Trump administration’s global trade tariffs, this unpredictable backdrop in our view emphasises the need to focus on high-quality companies that can generate their own weather and deliver long-term returns to shareholders.
Portfolio activity – buys and sells
Highlighting our commitment to finding and identifying innovative high-growth companies, we have added some new names to the portfolio since our last update.
AstraZeneca is a pharmaceutical company focused on oncology, cardiometabolic and rare diseases with a top three market position in cancer treatment, cardiovascular and immunology treatments. After a period of heavy investment in its business, we believe the company is a strong position to deliver sales and earnings growth.
Visa operates the world's largest payment network in a duopoly with Mastercard. Its core business is processing the transactions made with its cards and growth is being driven by the secular trend of digital payments and other value-added services such as payment where it is leveraging its long-established network and database. The firm benefits from a ‘capital light’ model with relatively fixed operating costs and strong pricing power. It has demonstrated resiliency to inflation and across different macro cycles.
Over the period we exited biotechnology firm Illumina due to its exposure to the parts of the healthcare system that are at risk of cuts in the US. We also exited apparel firm Lululemon in the wake of the latest US tariffs, as well as the risk to the company from a weaker consumer backdrop and more intense competition.
We are excited about the future for the Trust and look forward to you joining us on the next stage of the journey.”
Exciting future
We are excited about the future for the Trust and look forward to you joining us on the next stage of the journey. FEG’s focus on high growth sectors such as technology and healthcare aligns seamlessly with own strategy. Within this the heart of the product remains the same – a highly differentiated, quality growth portfolio of 25-40 companies, specially selected for their long-term growth potential.
Market Update
Tariffs – assessing the long-term impact
The Trump administration’s ‘Liberation Day’ sent shockwaves through the markets at the start of April.
As we record this, China and other nations are seeking to agree a more constructive trade deal with the US, with the market responding strongly. The US and China have agreed to slash tariffs for 90 days, and the UK set up a trade deal at the start of May. This could mean a more supportive backdrop both markets and the economic outlook. What this does highlight is that the increased volatility is likely to continue until we get full clarity about trade deals and tariffs.
The outlook for inflation - and the central bank response
Inflation remains an important factor to watch and is likely to increase further in the US in the near term, as tariffs get passed through to end-customers. This could spread to other regions with the possibility of retaliatory tariffs being imposed by Europe and China in particular. Therefore, in our view, if the tariffs do not get reversed stagflation becomes a plausible scenario.
For central banks, despite the continuing inflationary pressures the backdrop of deteriorating economic growth means they are likely to turn more dovish. Although the rate cuts are not likely to be as significant as the market hoped, any future cuts will be a positive for equities.
Looking through turmoil
Valuation discipline is a key part of our approach in identifying suitable investment opportunities, and despite the turmoil in US markets, Europe remains the most attractively valued amongst developed market equities. Within emerging markets, Chinese equities are more supportive on valuation, arguably the country has more levers to pull in terms of policy measures to prop up its economy. Market sentiment will however be an important catalyst, with any trade de-escalation likely to be taken positively by markets.
Europe remains the most attractively valued … Chinese equities are more supportive on valuation, arguably the country has more levers to pull in terms of policy measures to prop up its economy.”
Focus on quality amid earnings risks
The possibility of stagflation poses a negative risk to earnings, particularly for companies in more cyclical sectors, for example consumer firms, and those caught into the tariffs crossfire. Perhaps unsurprisingly the US has seen the largest reduction in its earnings growth forecast. European equity earnings forecasts have held up better despite a weak economic outlook due to fiscal support in Germany.
This highlights the need to focus on companies with resilient earnings. For example, those firms in cyclical sectors that while not immune to negative revisions can resist them, and companies supported by structural growth that can positively surprise the market.
We are invested in attractive structural growth trends around Artificial Intelligence, Energy Transition and Ageing Population, which offer good long-term prospects.”
Opportunities remain – but some froth emerging
It is uncertain environment, but opportunities remain for long-term investors. We continue to focus on seismic thematic opportunities with structural growth support. We are invested in attractive structural growth trends around Artificial Intelligence, Energy Transition and Ageing Population, which offer good long-term prospects, although we believe it is critical to maintain valuation discipline in order to capture the pockets of these themes that still have valuation support.
We do see signs of froth emerging, notably in the AI theme, and have been selectively positioned in areas where we can find strong support from fundamentals and valuations.
Easy ways to invest
Franklin Global Trust is suitable for tax-efficient wrappers like Individual Savings Accounts (ISAs) and Self-Invested Personal Pensions (SIPPs). To find out more about three easy ways to invest visit our How to Invest section.