CONTRIBUTORS
Michael Browne
Senior Investment Strategist,
Franklin Templeton Institute
Season of sentiments
In the last few days before Christmas, many of us reach for our playlists and listen to Christmas songs. No other time of year presents such an opportunity: We don’t play holiday songs in the last week of July in advance of an August break or sing of chocolate at Easter.
But many of these songs have a darker side: The melancholic Christmas song dates from 1944, with Judy Garland’s ‘Have Yourself a Merry Little Christmas’ as a wartime tune: Her phrasing, ‘Someday soon we all will be together, if the fates allow,’ captured longing. Elvis rebooted sad sentiments in 1964 with ‘Blue Christmas,’ and they have returned again and again, in the bitterness of “Stop the Cavalry,” the regret of ‘Last Christmas’ from Wham! and the poignance of ‘Somewhere Only We Know,’ by Lily Allen for the John Lewis Christmas ad.
It’s not entirely one-sided: Michael Bublé has done his best to put a bounce back into the holiday season. Mariah Carey’s ‘All I Want for Christmas’ and Leona Lewis’ ‘One More Sleep’ have lifted spirits. But then comes Ariana Grande, questioning Santa, ‘if you’re really there…’.
The parallel? I find it is much the same with market strategists, as they put the pen down on their outlooks. Are they consumed by a lack of hope at the winter solstice, or determined to make their readers know it’s the most wonderful time of the year?
Wisdom of crowds
To get around the bias of the lone strategist, we run the Franklin Templeton Global Investment Management Survey. The results for 2026 are optimistic. We expect interest rates to fall in the United States, and with lower rates, the yields on short-duration credit and corporate credit should also come down. We think yields on 10-year Treasuries will continue in a channel of 4.0% to 4.5% and, as such, the yield curve should steepen. This is good news for a broadening of the equity market rally, with small- and mid-capitalization stocks likely to play catch-up after years of underperformance.
With the US dollar remaining soggy, emerging markets could be the major beneficiary among international equities. That’s not to say that all equity markets won’t enjoy solid upside—we think they will! But in Europe, there is not much new news of a fiscal or monetary boost; all of it has been announced and is underway. The one country in need of a fiscal boost for the consumer remains China, and this boost could come, creating the possibility of an upgrade for 2026.
Investors like to climb a wall of worry; they would rather not ‘Deck the Halls’ and they certainly would not ‘Wish It Could Be Christmas Everyday.’ There remain fears over too much growth leading to inflation and not enough growth leading to stagflation (a combination of stagnant growth and elevated inflation). Geopolitics is always a concern, though you would hope investors would have learned from 2025’s outcomes.
So, it is fitting to remember that the ‘Carol of the Bells’ is originally a Ukrainian celebration song for the New Year called ‘Shchedryk.’ It tells of a swallow flying into a home in the cold of winter to tell of the wealth to come in spring.
I think 2026 should be just fine.
We wish happy holidays to everyone celebrating this time of year. Macro Moments Weekly will return with a new edition in early January.
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.
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.
WF: 7951797