CONTRIBUTORS
Michael Hasenstab, Ph.D.
Portfolio Manager, Chief Investment Officer, Templeton Global Macro®
Calvin Ho, Ph.D.
Portfolio Manager, Director of Research, Templeton Global Macro
This month’s Global Macro Insights offers a comprehensive update on regional developments, along with analysis of the key opportunities and challenges shaping the current macroeconomic landscape.
Key takeaways
February overview: US economic growth slipped in the fourth quarter (Q4) of 2025, partly due to the government shutdown. The US Supreme Court ruled that certain tariffs imposed by US President Trump’s administration require congressional approval and therefore were illegal; the administration responded by imposing a temporary global tariff under a different statute. February central bank meetings mostly left interest rates on hold, although Australia raised rates, further indicating that the global easing cycle seems to be nearing its end. Inflation continues to diverge somewhat among developed economies but remains fairly contained among a variety of emerging markets (EMs). The US dollar (USD) was modestly stronger on average in February, with mixed performance against a range of currencies. Most bond yields across developed and emerging markets were lower in February, with a smattering of exceptions among EMs. Geopolitical news came to the forefront again at month-end, with the United States and Israel engaging in conflict with Iran, leading to an increase in oil prices and renewed uncertainty.
Outlook: Various developments during February underscored our thesis that global rewiring continues to take place. These include exploratory talks related to the creation a new trading bloc between the European Union (EU) and the Trans-Pacific Partnership, as well as the willingness of various Western countries to engage more with China. Uncertainty remains a theme globally. Whereas it had seemed like some tariff-related uncertainty was lessening with the conclusion of various trade agreements, more recent events have thrown some of these into doubt. In addition to trade policy, geopolitical events have resurfaced as a source of potential instability, with the US-Israel strikes on Iran—which pulled other countries in the region into the conflict—adding to this. While uncertainty remains on a number of fronts, in general we see global growth as being quite resilient, though that might be tested if the current Middle East conflict becomes significantly protracted or broader. The global monetary policy easing cycle appears to be in a late stage, and pauses or increases in interest rates seem the most likely outcome across a range of countries. For now, our core themes of improving EM fundamentals, longer-term USD weakening and global rewiring (such as geopolitically induced shifts in global supply chains) remain intact.
WHAT ARE THE RISKS?
All investments involve risks, including possible loss of principal. There is no assurance that any estimate, forecast, or projection will be realized.
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. Low-rated, high-yield bonds are subject to greater price volatility, illiquidity and possibility of default.
Currency management strategies could result in losses if currencies do not perform as expected.
Active management does not ensure gains or protect against market declines.
Diversification does not guarantee a profit or protect against a loss.
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. Investments in companies in a specific country or region may experience greater volatility than those that are more broadly diversified geographically. The government’s participation in the economy is still high and, therefore, investments in China will be subject to larger regulatory risk levels compared to many other countries.
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