The Path to Recovery: What’s Next?

Our CIOs' Global Investment Outlook expands on navigating periods of uncertainty and volatility.


Looking at the economic and market outlook for 2020 just a few months ago, there’s no doubt times have changed. The spread of the coronavirus dealt a severe, unexpected shock that impacted people—and markets—around the globe. Many investors are wondering how to navigate the supply and demand shocks, and questioning, where do we go from here? While clearly the scope and reach of the coronavirus crisis is unprecedented, our senior investment leaders have plenty of experience navigating periods of uncertainty and volatility. They outline how they see a recovery taking shape once the crisis passes and offer some investment insights.

  • BASE CASE MOVES TO RECESSION—We’ve disaggregated our base-case scenario into two components. The first is the coronavirus and its immediate fallout. The second is the underlying fundamentals that underpin the economy. Our base-case has now moved to recession, based on readings of fundamental impacts, market reactions and the significant drag on economic activity globally.
  • MEDIUM- TO LONG-TERM OUTLOOK MORE POSITIVE—We believe diversification is really important in this sort of uncertain environment, and we are slowly starting to reposition our portfolios to take advantage of this extreme dislocation, because we think the medium- and longer-term outlook is more positive.
  • CHINA TOWARDS ECONOMIC ACTIVITY RESUMING—China appears to have been successful in domestically containing the coronavirus. Overall, cases have declined considerably, and economic activity is resuming. The government’s focus has now shifted away from containment towards economic normalization, with restrictions gradually being relaxed to improve the ease of doing business, although changed behaviors across the country are myriad and far-reaching.
  • MAGNITUDE OF DEMAND SHOCK UNDERAPPRECIATED—The full magnitude of the aggregate demand shock from the coronavirus may still be underappreciated by markets, in our view. Entire countries, regions and continents have come to an economic standstill.
  • LIKELY TO REVERBERATE FOR QUARTERS—Even the most sophisticated economic models are not fully equipped to calculate what it means when people across the world cannot leave their homes; cannot go to work; and cannot go to stores, restaurants, movies, sporting events, vacations or just about anything for months on end. These are unprecedented massive shocks to the global economy that are likely to reverberate for several quarters.
  • NO DOUBT A SEVERE CONTRACTION—The big question on everybody’s mind right now is how bad the economic downturn will be, and what kind of recovery lies ahead. There’s no doubt that activity will suffer a very severe contraction in March and April.
  • MONETARY AND FISCAL POLICY PROVIDING A BRIDGE—The good news, however, is that the monetary and fiscal policy response appears prompt, decisive and well designed. A coordinated combination of fiscal and monetary support can act as a bridge to help individuals and businesses weather the downturn and can set the stage for a robust rebound.


  • Chief Investment OfficerFranklin Templeton Multi-Asset Solutions
  • Chief Investment Officer Franklin Templeton Emerging Markets Equity
  • Chief Investment Officer Templeton Global Macro
  • Chief Investment Officer Franklin Templeton Fixed Income
  • Head of Equities


December 31, 2019–March 27, 2020


Sources: World Health Organization, Bloomberg. Franklin Templeton Capital Market Insights Group, MSCI, Macrobond. Indexes are unmanaged, and one cannot invest directly in an index. Past performance is not an indicator or guarantee of future performance. Important data provider notices and terms available at For illustrative purposes only and not representative of the performance or portfolio composition of any Franklin Templeton fund.


All investments involve risks, including possible loss of principal. Bond prices generally move in the opposite direction of interest rates. Thus, as the prices of bonds adjust to a rise in interest rates, the share price may decline. Investments in foreign securities involve special risks including currency fluctuations, economic instability and political developments. Investments in emerging market countries involve heightened risks related to the same factors, in addition to those associated with these markets’ smaller size, lesser liquidity and lack of established legal, political, business and social frameworks to support securities markets. Such investments could experience significant price volatility in any given year. High yields reflect the higher credit risk associated with these lower-rated securities and, in some cases, the lower market prices for these instruments. Interest rate movements may affect the share price and yield. Treasuries, if held to maturity, offer a fixed rate of return and fixed principal value; their interest payments and principal are guaranteed. Stock prices fluctuate, sometimes rapidly and dramatically, due to factors affecting individual companies, particular industries or sectors, or general market conditions.

Diversification does not guarantee profits or protect against risk of loss.