Navigating Risks in the Eurozone & China

PERSPECTIVES: Franklin Templeton's Hasenstab explains how to navigate game-changing events that are taking place in the eurozone and China

Franklin Templeton Investments, 30 July, 2012 | 12:10PM

In a time of severe stress and crisis, it’s easy to come to the conclusion that Armageddon is upon us. Those who believe the European Union is going to split up and China’s growth will come to a screeching halt are probably building bunkers and sharpening their survival skills right about now.

But Dr. Michael Hasenstab, co-director of global fixed income at Franklin Templeton and manager of $160 billion in assets, including the Silver-Rated Templeton Global Bond fund, isn’t in panic mode. In fact, he’s optimistic the eurozone will survive, and that no, China won’t move back into the feudal age. However, he does believe there are some game-changing events taking place in the financial markets and in China today that will have future consequences for investors—some potentially good, but others maybe not so much. As a long-term investor, he’s planning ahead for these potential future consequences, and is seeking out the high ground.

Thoughts on the Eurozone Crisis
We’ve heard Hasenstab’s views before on the European debt crisis. He still believes that should Greece ultimately leave the euro, that the “ring fences” are in place—that is, the European financial system is prepared to weather a “Grexit.” In the long-run, he thinks that outcome might not be a bad thing if the alternative is that the rest of the EU has to indefinitely subsidize Greece.  He has noted seeing signs of slow progress underway in Spain and Italy, and believes there are reasons to be optimistic about Europe’s future.

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