Strategic Asset Allocation in the Trump Era

Global asset management firm Franklin Templeton is adopting a discerning approach too investment, emphasizing high-caliber growth stocks, dividend-yielding equities, and U.S. government bonds under a potential second Trump management. The firm also sees promise in specific emerging markets, especially India, which appears relatively insulated from certain global trade tensions.

U.S. Equities: Focusing on Growth and Innovation

According to Grant Bowers, Portfolio Manager within franklin Templeton’s Equity Group, the U.S. market presents compelling opportunities. Despite potential short-term volatility stemming from rapid policy shifts, Bowers believes that increased federal spending, strategic fiscal adjustments, and deregulation could unlock new avenues for growth.He stated:

We are investing in a selection of high-quality growth stocks, which are expected to benefit from AI, healthcare innovation, and manufacturing and industrial activities in the United States.
Grant Bowers, Franklin Templeton Equity Group

This strategy reflects a focus on sectors poised to benefit from technological advancements and domestic economic initiatives.

Income Generation and Risk Management

Todd brighton, Portfolio Manager at Franklin Investors, is constructing a portfolio that balances bonds and stocks, capitalizing on attractive valuations amid market volatility. Dividend stocks are a key component, with a focus on growth companies utilizing Equity-linked Notes (ELNs) to enhance profitability, mitigate downside risk, and generate capital appreciation. Brighton also highlighted the appeal of agency mortgage-backed securities (Agency MBS) and U.S. Treasury bonds,citing their ability to deliver competitive returns while effectively managing risk.

China: Identifying Opportunities Amid Decoupling Trends

Yi Ping Lao, Portfolio Manager and Chief Analyst at Franklin Templeton, views the ongoing U.S.-China trade friction as an extension of the decoupling trend that began during President Trump’s first term. While approaching the Chinese stock market with caution, Lao emphasizes the importance of a bottom-up approach to identify high-quality stocks. He suggests that companies focused on the domestic market and technology leaders with limited reliance on the U.S. hold particular promise. This outlook acknowledges the resilience of China’s vast domestic market and its commitment to investing in human capital.

currently,China’s domestic consumption is a meaningful driver of its economy. According to the National Bureau of Statistics of china, retail sales of consumer goods increased by 4.7% year-on-year in the first quarter of 2025, highlighting the strength of the domestic market.

Emerging Markets: India as a Standout

Franklin Templeton identifies Asian emerging markets as attractive investment destinations, particularly India. The country’s large domestic market is expected to limit the economic impact of tariffs, potentially giving it an advantage in trade negotiations.in contrast, Korea, with its export-oriented economy, faces potential challenges due to its deep integration into the global supply chain.

However, Lao Manager also noted Korea’s strategic importance to the U.S. and the significant investments Korean companies are making in U.S. manufacturing.

Currency Outlook: A Weaker dollar on the Horizon?

Carol Lai, Portfolio Manager and Senior Research Analyst at brandywine Global (a Franklin Templeton subsidiary), anticipates a potential weakening of the U.S. dollar.Lai suggests that immigration and tariff policies could increase the likelihood of a U.S. economic slowdown, while global growth may be hampered by tariff negotiations. She stated:

The convergence of growth and fiscal policy between the United States and other countries can lead to asset cultivation from the United States to other countries, and is expected to weaken the dollar.
Carol Lai, Brandywine Global

Lai also noted that tariffs imposed on Europe and China could reduce their growth rates by 1-2%, although this may be partially offset by financial stimulus measures.

Bond Strategy: Neutral Duration, Selective Opportunities

In the bond sector, Franklin Templeton maintains a neutral duration stance on G10 government bonds, favoring UK gilts over Eurozone bonds. within emerging markets, the firm sees opportunities in high-yielding local currency bonds in countries like Mexico, Brazil, and South Africa, while Chinese and Korean government bonds are viewed as safe-haven assets.