Amidst an eventful 2023, investors are grappling with geopolitical and economic hurdles worldwide, alongside looming concerns of a potential US recession. Yet, Franklin Templeton believes that three prominent value equity themes are emerging for the latter part of this year. This includes opportunities in non-US and US companies driven by underlying trends in the US economy, ongoing investment in real assets, and Japan’s growth potential.

“The prospect of higher interest rates leading to a recession has made investors nervous, causing volatility and market dislocations,” said Christian Correa, CIO at Franklin Mutual Series, on the US economy. “But as US inflation continues to subside and labour markets remain strong, we continue to see opportunities at reasonable prices.”

Subsequently, Franklin Templeton talks about how value equity investing in real assets is anticipated to gain traction, backed by increased infrastructure spending. As per Correa, this trend bodes well for the global and US economies, alongside benefiting value investors. 

“We expect value-oriented companies that deal in building materials, construction equipment, manufacturing, and other related industries to see increased demand as this trend continues over the next several years,” added Correa. 

Furthermore, the asset manager opines that in Japan, there are a lot of value equity investing opportunities in undervalued companies, fueled by the country’s promising economic growth and mild inflation. 

Correa points out that government initiatives, stock exchange dynamics, and shareholder activism in Japan are propelling businesses to enhance dynamism. According to him, the catalyst for reform in Japan stems from acknowledging demographic changes – a rapidly ageing society necessitates heightened returns on the capital base.  

“Changes in the (Japanese) economy and to the way businesses operate will be necessary to facilitate returns…We think that these themes stand out against the backdrop as areas of opportunity for investors in the coming months and look forward to providing additional insights and updates as the year unfolds,” said the asset manager. 

Read the full insight here.