Around the World with Franklin...

Around the World with Franklin Templeton

The information provided is not a complete analysis of every material fact regarding any country, region,

market, investment, or strategy. Because market and economic conditions are subject to change,

comments, opinions and analyses are rendered as of 1st March, 2017, and may change without notice.

Opinions are intended to provide insight on macroeconomic issues and commentary is not intended as

individual investment advice or a recommendation or solicitation to buy, sell or hold any security or to

adopt any investment strategy.

For Sophisticated Investor and Wholesale Client Use Only. Not for Distribution to Retail Clients.

A Global Perspective with Local Insight

Macroeconomic

Indicators

Global Fixed Income

Global Equity

Currency &

Commodities

Macroeconomic Indicators

Currency & CommoditiesGlobal EquityGlobal Fixed Income

GDP of Major Economies

Source: FactSet, International Monetary Fund. Important data provider notices and terms available at www.franklintempletondatasources.com. 3

Macroeconom

ic Indicators

http://www.franklintempletondatasources.com/

Contribution to World GDP Growth: China & Rest of World

Calculations by Franklin Templeton’s Global Research Library with data sourced from FactSet, International Monetary Fund. Important data provider notices and terms available at

www.franklintempletondatasources.com. Estimates as of October 2016.

Macroeconom

ic Indicators

4


2017 Emerging Market GDP Growth Comparedto Developed Markets

*G7 composed of 7 countries: Canada, France, Germany, Italy, Japan, UK, and US. IMF estimates as of October 2016.

Source: FactSet, International Monetary Fund. Important data provider notices and terms available at www.franklintempletondatasources.com.

-4

-2

0

2

4

6

8

%

2017E Developed Markets

GDP Growth (G7*)

5

Macroeconom

ic Indicators


IMF Growth Projections (percent change over previous year, as of October 2016)

2000-2007

Average2015 2016E 2017E

World 4.49 3.20 3.08 3.44

United States 2.65 2.60 1.60 2.30

Euro Area 2.23 2.00 1.70 1.60

Japan 1.52 1.20 0.90 0.80

Emerging Economies 6.59 4.10 4.10 4.50

Developing Asia 8.33 6.70 6.30 6.40

China 10.51 6.90 6.70 6.50

Latin America 3.64 0.10 -0.70 1.20

MENA 5.90 2.10 3.20 3.16

GDP Forecasts

Source: FactSet, International Monetary Fund. Important data provider notices and terms available at www.franklintempletondatasources.com.

Macroeconom

ic Indicators

6


Central Bank’s Policy Rates

1 Source: FactSet, Bank of England, Federal Reserve System.

2 Source: FactSet, Eurostat, Bank of Japan, People’s Bank of China.

Important data provider notices and terms available at www.franklintempletondatasources.com.

9M

acroeconomic Indicators

7


-0.75

-0.65

-0.50

-0.40

-0.10

-0.8

-0.6

-0.4

-0.2

0

%

Switzerland - Target 3-Month LIBOR Rate Denmark - Monetary Policy Rate, Certificates Of Deposit

Sweden - Repo Rate Eurozone - ECB Deposit Rate

Japan - BoJ Uncollateralized Overnight Call Target Rate

Central Banks with Negative Interest RatesAs of February 20, 2017

Central Banks with Negative Interest Rates

Source: FactSet, Bank of Japan, Denmark National Bank, ECB - European Central Bank, Central Bank of Sweden, Swiss National Bank.


Macroeconom

ic Indicators

8


-2%

-1%

0%

1%

2%

3%

Denmark Sweden Switzerland Eurozone United Kingdom

Change in Savings Rate After NIRP Implementation

Source: FactSet, Oxford Economics. *Deposit Facility Rate.


Personal Savings Rate: Nominal ChangeDecember 31, 2013 – December 31, 2016

Date of NIRP Implementation:

ECB*: June 11, 2014

SNB: December 18, 2014

Riksbank: February 12, 2015

Macroeconom

ic Indicators

9


Global Easing is Now Being Driven by Japan and Europe

* Bank of England has made changes in the statistics reporting in September 2014.

Sources: Bloomberg, Federal Reserve, European Central Bank, Bank of England, Bank of Japan, People's Bank of China.

Important data provider notices and terms available at www.franklintempletondatasources.com. 10

Macroeconom

ic Indicators

0

100

200

300

400

500

600

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Ind

exed

to

100

(in

Lo

cal C

urr

ency

)

Central Banks: Total AssetsFrom January 2008 to January 2017

US (Fed) Eurozone (ECB) UK (BoE)* Japan (BoJ) China (PBoC)


1 Source: FactSet, S&P Dow Jones Indices, Federal Reserve.

2 Source: FactSet, Bank of Japan.

3 Source: FactSet, European Central Bank, MSCI.


Central Bank Assets & Equity Markets

11

Macroeconom

ic Indicators


Unemployment Rate (%)

Source: FactSet, Spain: INE - Spanish National Statstical Institute; Italy: ISTAT - Italian National Statstical Institute; Eurozone: Eurostat; France: INSEE – France; Brazil: IBGE – Brazil;

Australia: ABS – Australia; Russia: Goskomstat of Russia; UK: ONS - UK Office for National Statstics; India: Oxford Economics; US: US Department of Labor; Germany: German

Federal Labour Office; China: National Bureau of Statistics of China; South Korea: Korean National Statistical Office; Japan: Ministry of Internal Affairs & Communications - Japan.

Important data provider notices and terms available at www.franklintempletondatasources.com.12

18.63

11.99 11.90

10.009.60

5.71 5.47 5.404.80 4.6

4.10 4.023.60

3.10

0

2

4

6

8

10

12

14

16

18

20

Spain(12/2016)

Italy(12/2016)

Brazil(11/2016)

France(12/2016)

Eurozone(12/2016)

Australia(11/2016)

India(12/2016)

Russia(11/2016)

UK(12/2016)

US(12/2016)

Germany(11/2016)

China(12/2016)

SouthKorea

(11/2016)

Japan(11/2016)

Unemployment Rate (%)

Macroeconom

ic Indicators


Debt Growth Has Outpaced Economic Growth Since the Mid-90’s

Global Non-Financial Debt vs. GDPDecember 31, 1960 – June 30, 2016

US

D T

rillio

ns

Calculations by Franklin Templeton’s Global Research Library with data sourced from Bank for International Settlements, World Bank, FactSet. Important data provider

notices and terms available at www.franklintempletondatasources.com.

Macroeconom

ic Indicators

13

0

20

40

60

80

100

120

140

160

180

1960

1962

1964

1966

1967

1969

1971

1973

1974

1976

1978

1980

1981

1983

1985

1987

1988

1990

1992

1994

1995

1997

1999

2001

2002

2004

2006

2008

2009

2011

2013

2015

Total Non-Financial Credit GDP at Market Prices


Japan

China

Euro Zone

US

UK

Germany

Australia

India

Canada

Russia

South Korea

Indonesia

France

Emerging Markets

Switzerland

Czech Republic

Vietnam

-15

-10

-5

0

5

10

15

20

45 47 49 51 53 55 57 59

Ch

ang

e o

ver

last

6 m

on

ths

Levels

Manufacturing Purchasing Managers’ Index

Source: FactSet, Markit. Important data provider notices and terms available at www.franklintempletondatasources.com.

Macroeconom

ic Indicators

Manufacturing Purchasing Managers’ Index (PMI)As of January 31, 2017

Contracting

14

Expanding


Manufacturing and Services PMI

Macroeconom

ic Indicators

Source: FactSet, Markit. Important data provider notices and terms available at www.franklintempletondatasources.com. 15


Industrial Production Index (YoY % change)

1 Source: FactSet, Federal Reserve System. 2 Source: FactSet, National Bureau of Statistics of China. 3 Source: FactSet, Eurostat. 4 Source: FactSet, UK Office for National Statistics.

5 Source: FactSet, Korean National Statistical Office. 6 Source: FactSet, METI-Ministry of Economy, Trade & Industry Japan.


Macroeconom

ic Indicators

16


US Corporate Profits as a Share of GDP (%) and Wages & Labor Productivity

1 Source: FactSet, US Bureau of Economic Analysis.

2 Source: FactSet, US Department of Labor.


Wages

Labor

Productivity

Macroeconom

ic Indicators

17


US Corporate Profits

Calculations by Franklin Templeton’s Global Research Library with data sourced from US Bureau of Economic Analysis.

Macroeconom

ic Indicators

18

US Corporate Profits, Nominal Quarterly Change (IVA Adjusted)Q3/2015 to Q3/2016

US

D B

illio

ns

-200

-150

-100

-50

0

50

100

150

Q3/2015 Q4/2015 Q1/2016 Q2/2016 Q3/2016

Domestic Corporate Profits Foreign Corporate Profits Total Corporate Profits

19

Japan Corporate Current Profits (SA)

June 1985 to September 2016

Source: Bloomberg, Ministry of Finance.


Japan Corporate Profits are Near All Time Highs

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

20,000

1985 1988 1991 1994 1997 2000 2003 2006 2009 2012 2015

JPY

Bill

ion

Macroeconom

ic Indicators

http://www.franklintempletondatasources.com./

20

Source: FactSet, Statistics Canada.


Canadian Corporate Profits Were at All Time Highs in the Fourth Quarter of 2014

Macroeconom

ic Indicators


Mergers & Acquisitions Total Deal Value vs. Deal CountJanuary 1, 2005–December 31, 2016

21

Mergers & Acquisitions in the US

For illustrative and discussion purposes only

Source: Bloomberg.

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

10,000

0

400

800

1,200

1,600

2,000

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Deal C

ou

nt

Tota

l Dea

l Val

ue

(UD

S B

illio

ns)

Total Deal Value (LHS) Deal Count (RHS)

Macroeconom

ic Indicators

Consumer Prices Globally

1 Source: FactSet, US Department of Labor, National Bureau of Statistics of China, Eurostat.

2 Source: FactSet, International Monetary Fund, Ministry of Internal Affairs and Communications, UK Office for National Statistics.


Macroeconom

ic Indicators


23

German Inflation Measures

* Total Industry excluding energy.

1 Source: FactSet, Deutsche Bundesbank, German Federal Statistical Office.

2 Source: FactSet, German Federal Statistical Office.


Macroeconom

ic Indicators


US Consumer

1 Source: FactSet, US Bureau of Economic Analysis.

2 Source: FactSet, Federal Reserve System.


Macroeconom

ic Indicators

24


US Housing

1 Source: FactSet, US Census Bureau, National Association of Realtors (NAR).

2 Source: FactSet, US Census Bureau.


Macroeconom

ic Indicators

25


US Housing (Cont’d.)

1 Source: FactSet.

2 Source: FactSet, National Association of Realtors (NAR).

3 Source: FactSet, Federal Reserve System.


Macroeconom

ic Indicators


Major Net Importers vs. Exporters

Source: FactSet, Oxford Economics. Important data provider notices and terms available at www.franklintempletondatasources.com.

Macroeconom

ic Indicators

27


0.7% 2.0% 2.4% 2.8%5.0% 5.1%

9.5% 10.5%14.6%

16.4%

26.2%

0%

10%

20%

30%

Who Gets Hurt by the Slowdown in China?

1 Source: FactSet, International Monetary Fund (IMF) World Economic Outlook, National Bureau of Statistics of China. Important data provider notices and terms available at

www.franklintempletondatasources.com.

2 Source: Bank for International Settlements (BIS).

Exports to China: % of GDP¹Exports: December 2015 to November 2016, GDP: 2017E

Foreign Banks’ Claims on Chinese Counterparties²As of Q2/2016, US$ Billions

Macroeconom

ic Indicators

28

8.5 14.6 20.0 26.8 27.936.3

45.4

67.776.4

140.9

0

50

100

150

200

Canada Switzerland Korea Germany Australia Taiwan France Japan U.S. UK


Macroeconomic Indicators

Global Fixed Income

Currency & CommoditiesGlobal Equity

0

2

4

6

8

10

12

14

16

18

Brazil Indonesia Malaysia Poland NewZealand

Australia US SouthKorea

Canada Sweden Eurozone Japan

%

Current ( 1/3/2017 ) One Year Ago ( 12/31/2015 )

10-Year Bond Yields

Source: FactSet, JP Morgan, Tullett Prebon Information. Important data provider notices and terms available at www.franklintempletondatasources.com.

10-Year Bond YieldsAs of 01/04/2017

Global F

ixed Income

30


Interest Rates Have Declined for Almost Three Decades

Source: FactSet, Tullett Prebon Information. Important data provider notices and terms available at www.franklintempletondatasources.com.

Global F

ixed Income

31


Government Bond Yields for Selected European Countries

Government Bond Yields as of February 21, 2017

Source: Bloomberg.

Global F

ixed Income

32

1YR 2YRS 3YRS 4YRS 5YRS 6YRS 7YRS 8YRS 9YRS 10YRS

Switzerland -0.98 -0.99 -0.89 -0.80 -0.67 -0.56 -0.42 -0.31 -0.23 -0.15

Germany -0.87 -0.86 -0.77 -0.64 -0.48 -0.35 -0.20 -0.03 0.14 0.32

Finland -0.67 -0.70 -0.65 -0.47 -0.19 -0.14 0.06 0.14 0.40 0.51

Netherland -0.73 -0.78 -0.69 -0.58 -0.29 -0.09 0.14 0.33 0.49 0.65

Austria -0.71 -0.72 -0.65 -0.54 -0.34 -0.12 0.04 0.24 0.42 0.62

Belgium -0.60 -0.52 -0.44 -0.33 -0.13 0.01 0.29 0.53 0.69 0.86

France -0.54 -0.44 -0.25 -0.06 0.17 0.25 0.42 0.64 0.89 1.10

Ireland -0.45 -0.41 -0.33 -0.24 0.13 0.36 0.62 0.86 1.09

Sweden -0.63 -0.32 -0.04 0.21 0.43 0.66

Italy -0.25 0.01 0.33 0.53 0.94 1.26 1.59 1.89 1.97 2.20

Spain -0.28 -0.27 -0.13 0.12 0.31 0.75 0.97 1.29 1.51 1.63

Calculations by Franklin Templeton’s Global Research Library with data sourced from Bloomberg.

Global F

ixed Income

33

Bloomberg Global Developed Sovereign Bond Index: Market ValueAs of February 21, 2017

Yield to Maturity

US

D T

rillio

ns

Almost $6 Trillion of Negative-Yielding Sovereign Bonds and $13 Trillion under 1%

0

2

4

6

8

Less Than Zero Zero to 1% 1% to 2% More than 2%

Barclays US High Yield: 1-Year Change

Source: FactSet, Barclays. Important data provider notices and terms available at www.franklintempletondatasources.com.

Global F

ixed Income

34


Global F

ixed Income

Source: FactSet. Important data provider notices and terms available at www.franklintempletondatasources.com.

Some Shorter-Term Corporate Bonds Now Have Negative Yields

35


Yield Curve Is Compressing, but Still Not Inverted

Source: FactSet, Tullett Prebon Information. Important data provider notices and terms available at www.franklintempletondatasources.com. 36

Global F

ixed Income


Yield Spreads

Source: FactSet, BofA Merrill Lynch. Important data provider notices and terms available at www.franklintempletondatasources.com.

Global F

ixed Income

37


Global Equity

Macroeconomic Indicators Currency & CommoditiesGlobal Fixed Income

Global Market Capitalization

Calculations by Franklin Templeton’s Global Research Library with data sourced from Bloomberg.

Note: Global market capitalization data does not include ETFs and ADRs as they do not directly represent companies. It includes only actively traded, primary securities on the

country’s exchanges to avoid double counting.

$66.8 Trillion as of 12/31/2016

US, 38%

Canada, 3%

Europe (Developed), 18%

Japan, 8%

Asia/Pacific ex-Japan, 26%

Brazil, 1%

Rest of the World, 4% Middle East, 2%

Global E

quity

39

Global GDP 2016 IMF Forecast vs. Market Cap December 2016

*Developed Markets consists of 23 countries: Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany, Hong Kong, Ireland, Israel, Italy, Japan, Netherlands, New

Zealand, Norway, Portugal, Singapore, Spain, Sweden, Switzerland, UK and US.

**Emerging Markets consists of 23 countries: Brazil, Chile, China, Colombia, Czech Republic, Egypt, Greece, Hungary, India, Indonesia, South Korea, Malaysia, Mexico, Peru,

Philippines, Poland, Qatar, Russia, South Africa, Taiwan, Thailand, Turkey and United Arab Emirates.

1 Calculations by Franklin Templeton’s Global Research Library with data sourced from FactSet, International Monetary Fund.

2 Calculations by Franklin Templeton’s Global Research Library with data sourced from Bloomberg.


57%33%

10%

Developed & Emerging MarketsGDP as a % of World GDP1

2016 Forecast

Developed Markets*

Emerging Markets**

Rest of the World

75.3%

22.2%

2.4%

Developed & Emerging Markets Market Cap as a % of World Market Cap2

As of December 31, 2016

Global E

quity

40


38%

47%

15%

Developed & Emerging MarketsGDP as a % of World GDP1

2016 Forecast

Developed Markets*

Emerging Markets**

Rest of the World

Global GDP Based on PPP*** 2016 IMF Forecast vs. Market Cap December 2016

*Developed Markets consists of 23 countries: Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany, Hong Kong, Ireland, Israel, Italy, Japan, Netherlands, New

Zealand, Norway, Portugal, Singapore, Spain, Sweden, Switzerland, UK and US.

**Emerging Markets consists of 23 countries: Brazil, Chile, China, Colombia, Czech Republic, Egypt, Greece, Hungary, India, Indonesia, South Korea, Malaysia, Mexico, Peru,

Philippines, Poland, Qatar, Russia, South Africa, Taiwan, Thailand, Turkey and United Arab Emirates.

***Purchasing Power Parity

1 Calculations by Franklin Templeton’s Global Research Library with data sourced from FactSet, International Monetary Fund.

2 Calculations by Franklin Templeton’s Global Research Library with data sourced from Bloomberg.


75.3%

22.2%

2.4%

Developed & Emerging Markets Market Cap as a % of World Market Cap2

As of December 31, 2016

Global E

quity

41


0%

5%

10%

15%

20%

25%

30%

MSCI All Country World: Sector Weights (15 Years)

Source: FactSet, MSCI. MSCI makes no warranties and shall have no liability with respect to any MSCI data reproduced herein. No further redistribution or use is permitted. This

report is not prepared or endorsed by MSCI. Important data provider notices and terms available at www.franklintempletondatasources.com.

From 12/31/2001 to 12/31/2016

Global E

quity

High-Low Range Current Mean

42


0%

20%

40%

60%

80%

100%

1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015

Sector Weights

Source: FactSet, MSCI. MSCI makes no warranties and shall have no liability with respect to any MSCI data reproduced herein. No further redistribution or use is permitted.

This report is not prepared or endorsed by MSCI. Important data provider notices and terms available at www.franklintempletondatasources.com.

Average Current

Real Estate 3% 3%

Energy 8% 7%

Materials 6% 5%

Industrials 11% 11%

Consumer Disc. 12% 12%

Consumer Staples 9% 10%

Health Care 11% 12%

Financials 21% 18%

Technology 12% 15%

Telecom 5% 3%

Utilities 4% 3%

MSCI World Sector WeightsJanuary 1995 – December 2016

Weig

ht

%

43

Global E

quity


Equity Performance Post Fed Rate Hikes

Source: FactSet, S&P Dow Jones Indices, as of 02/17/2017. Important data provider notices and terms available at www.franklintempletondatasources.com.

Global E

quity

44

-5%

0%

5%

10%

15%

Three-Year Average Cumulative Price Return Following Fed TighteningS&P 500 Index, Since March 1, 1971

Nine Tightening Periods: 1971, 1976, 1983, 1987, 1994, 1999, 2004, 2015 and 2016

Year 1 Year 2 Year 3


Price Relative to MSCI AC World Index Local Currency



Global E

quity

45


Emerging Markets Outperformed for 10 Years

Source: FactSet, MSCI. MSCI makes no warranties and shall have no liability with respect to any MSCI data reproduced herein. No further redistribution or use is permitted. This report

is not prepared or endorsed by MSCI. Important data provider notices and terms available at www.franklintempletondatasources.com.

Global E

quity

46


Value’s Recent Underperformance Is Comparable to the Tech Bubble

Global E

quity

47




Value and Growth Drivers

Source: FactSet, MSCI. Important data provider notices and terms available at www.franklintempletondatasources.com.

Blue: Value Drivers

Green: Growth Drivers

Global E

quity

48


Country Performance: YTD Total Returns

All returns assume reinvestments of dividends and capital gains. The index is unmanaged, and one cannot invest directly in an index.

Past performance does not guarantee future results.



Global E

quity

49

-6

-4

-2

0

2

4

6

8

10

MS

CI A

C W

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Bra

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New

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Sin

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Po

lan

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ited

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No

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Ch

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Hu

ng

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So

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Afr

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Co

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Ind

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Can

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aila

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Den

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and

Un

ited

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ain

Ind

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Irel

and

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ium

Eg

ypt

Gre

ece

Ru

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Tu

rkey

Mex

ico

MSCI AC World Index (% change)As of 01/20/2017 (in US Dollars)


Country Cumulative Performance: Total Return

All returns assume reinvestments of dividends and capital gains. The index is unmanaged, and one cannot invest directly in an index.

Past performance does not guarantee future results.



Global E

quity

-100

-50

0

50

100

150

200

MS

CI A

C W

orl

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Un

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Ara

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Bel

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Ho

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Ko

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Mal

aysi

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zech

Rep

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Bra

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Co

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bia

Gre

ece

MSCI AC World Index 5Yr Cumulative Total Return (% change)From 12/30/2011 to 12/31/2016 (in US Dollars)

50


World Market Performance

Returns in US$

1 Source: FactSet, MSCI. MSCI makes no warranties and shall have no liability with respect to any MSCI data reproduced herein. No further redistribution or use is permitted. This

report is not prepared or endorsed by MSCI.

2 Source: FactSet, S&P Dow Jones Indices.


Global E

quity

51


Why You Should Diversify

Rankings based on the countries in the MSCI All Country World Index. As of December 31, 2016 there were 46 countries in the index; on average since 1989 there were 42 countries.

Performance measured in US$; total return (gross dividends are reinvested). Past performance cannot guarantee future results.



Top 3 Equity Markets

1st 2nd 3rd US

1989 Thailand Austria Greece 18th

1990 Greece Mexico Chile 11th

1991 Argentina Brazil Mexico 8th

1992 Jordan Philippines Thailand 8th

1993 Turkey Philippines Hong Kong 31st

1994 Brazil Finland Chile 19th

1995 Switzerland US Sweden 2nd

1996 Venezuela Poland Brazil 17th

1997 Turkey Hungary Mexico 10th

1998 South Korea Finland Greece 9th

1999 Turkey Russia Finland 25th

2000 Israel Switzerland Canada 18th

2001 Russia South Korea Colombia 22nd

2002 Pakistan Czech Republic Indonesia 38th

2003 Thailand Turkey Brazil 47th

2004 Colombia Egypt Hungary 43rd

2005 Egypt Colombia Jordan 42nd

2006 China Indonesia Morocco 40th

2007 Peru Brazil Turkey 42nd

2008 Morocco Colombia Israel 7th

2009 Brazil Indonesia Russia 38th

2010 Thailand Peru Chile 22nd

2011 Ireland Indonesia New Zealand 4th

2012 Turkey Philippines Egypt 29th

2013 Greece Finland Ireland 4th

2014 Egypt Indonesia Philippines 8th

2015 Hungary Denmark Ireland 13th

2016 Brazil Russia Peru 17th

Global E

quity

52


0.0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

Ave

rag

e R

-Sq

uar

eGlobal Correlations

Calculations by Franklin Templeton’s Global Research Library with data sourced from FactSet, MSCI. Important data provider notices and terms available at


One-Year Rolling Correlation in Weekly Price Change of 45 Markets

against the MSCI AC World IndexThrough 01/13/2017

53

Global E

quity


0

10

20

30

40

50

60

70

80

Global Price to Earnings

Price to Earnings (LTM) for Selected MSCI Indexes, Last 15 YearsFrom 12/30/2001 to 12/31/2016

More

Expensive

Less

Expensive

High: 109.71



Global E

quity


54


0

1

2

3

4

5

6

Global Trailing Price-to-Book Value



Price-to-Book Value (LTM) for Selected MSCI Indexes, Last 15 yearsFrom 12/30/2001 to 12/31/2016

Global E

quity

More

Expensive

Less

Expensive


55


0

5

10

15

20

25

30

35

De

nm

ark

US

A

Jap

an

Be

lgiu

m

MS

CI

Wo

rld

In

dex

Ne

the

rla

nd

s

Ca

na

da

Sw

itze

rla

nd

Ire

lan

d

Ne

w Z

eala

nd

Sw

ed

en

Germ

an

y

Fra

nc

e

Au

str

alia

Fin

lan

d

Ho

ng

Ko

ng

Un

ite

d K

ing

do

m

Isra

el

Sin

ga

po

re

No

rway

Ita

ly

Sp

ain

Au

str

ia

Po

rtu

ga

l

Developed Markets: CAPE12/30/2016As of

Cyclically Adjusted Price-to-Earnings (CAPE) for Developed Markets

Global E

quity

56

Not inflation adjusted, in local currency.




Cyclically Adjusted Price-to-Earnings (CAPE) for Emerging Markets

Global E

quity

57

Not inflation adjusted, in local currency.



0

5

10

15

20

25

30

35

Eg

yp

t

Me

xic

o

Ph

ilip

pin

es

Ind

ia

So

uth

Afr

ica

Ind

on

es

ia

Ta

iwan

Co

lom

bia

Ch

ile

Th

ail

an

d

Ma

lays

ia

Pe

ru

UA

E

MS

CI

EM

In

de

x

Qata

r

Hu

ng

ary

Bra

zil

So

uth

Ko

rea

Tu

rke

y

Ch

ina

Po

lan

d

Ru

ss

ia

Cze

ch

Re

pu

blic

Gre

ec

e

Emerging Markets: CAPE12/30/2016As of


Last 12 Months Price-to-Earnings Ratio for Selected MSCI Indexes

MSCI Price-to-Earnings Ratio (Trailing)As of December 31, 2016

Bar Colors Show Weights



Global E

quity

58

10.9x

13.0x14.3x

17.5x 17.7x18.6x 19.0x

19.8x21.0x

21.9x23.2x

24.1x

27.5x

0

5

10

15

20

25

30

0

5

10

15

20

25

30

Ko

rea

Ch

ina

EM

Sp

ain

Jap

an

Bra

zil

Au

stra

lia

Ind

ia

Fra

nce

Wo

rld

US

Can

ada

UK

P/E

Real Estate Utilities Telecom Services Information Technology

Financials Health Care Consumer Staples Consumer Discretionary

Industrials Materials Energy


0

3

6

9

12

US Sector Valuations: Trailing Price-to-Book Value

MSCI US Index: Price-to-Book Value, Last 15 Years From 12/31/2001 to 12/31/2016



Global E

quity

More

Expensive

Less

Expensive


59


Europe Sector Valuations: Trailing Price-to-Book Value

0

2

4

6

8

MSCI Europe Index: Price-to-Book Value, Last 15 Years From 12/31/2001 to 12/31/2016



Global E

quity

More

Expensive

Less

Expensive


60


Global Sector Valuations: Trailing Price-to-Book Value

MSCI AC World Index: Price-to-Book Value, Last 15 Years From 12/31/2001 to 12/31/2016

0

2

4

6

8



Global E

quity

More

Expensive

Less

Expensive


61


1%

2%

3%

4%

5%

6%

7%

8%

Q1-9

9Q

4-9

9Q

3-0

0Q

2-0

1Q

1-0

2Q

4-0

2Q

3-0

3Q

2-0

4Q

1-0

5Q

4-0

5Q

3-0

6Q

2-0

7Q

1-0

8Q

4-0

8Q

3-0

9Q

2-1

0Q

1-1

1Q

4-1

1Q

3-1

2Q

2-1

3Q

1-1

4Q

4-1

4Q

3-1

5Q

2-1

6

S&P 500 Index: Dividends, Buybacks & Capex

S&P 500 12-Month Trailing Buyback

and Dividend Yield

How Companies Spend Their CashS&P 500 Uses of Cash

62

For illustrative and discussion purposes only. Source: FactSet. Data compiled on January 12, 2017. See www.franklintempletondatasources.com for additional data provider information.

As of December 31, 2015 As of September 30, 2016

0

100

200

300

400

500

600

700

800

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

20

15

$ B

illi

on

s

Dividends Buybacks Capex


S&P 500: Magnitude of Bull & Bear Markets

Bull & Bear Markets Defined as 20% Reversals in the S&P 500 Index (from the low data to the highest and vice versa). Calculated from the highest to the low point and vise

versa. The end of the current bull market has not been yet defined.

Calculations by Franklin Templeton’s Global Research Library with data sourced from FactSet, S&P Dow Jones Indices. Important data provider notices and terms available

at www.franklintempletondatasources.com.

Current Bull Market Is One of the Strongest in History December 31, 2016

Cu

mu

lati

ve

Retu

rn %

Global E

quity

63

-100%

0%

100%

200%

300%

400%

500%

1928 1932 1933 1935 1938 1942 1948 1962 1970 1974 1982 1987 2002 2009

Preceding Decline Cumulative Return Average Appreciation Average Decrease


Market Volatility

Source: FactSet, CBOE. Important data provider notices and terms available at www.franklintempletondatasources.com.

Global E

quity

64


Small-Cap Stocks vs. Large Caps

1 Source: FactSet, S&P Dow Jones Indices, Russell Investment Group. Russell Investment Group is the source and owner of the trademarks, service marks and copyrights

related to the Russell Indexes. Russell® is a trademark of Russell Investment Group.

2 Source: FactSet, MSCI. MSCI makes no warranties and shall have no liability with respect to any MSCI data reproduced herein. No further redistribution or use is permitted. This

report is not prepared or endorsed by MSCI.


Global E

quity

65


Currency & Commodities

Macroeconomic Indicators Global Fixed Income Global Equity

Currencies Performance vs the US Dollar

Data as on January 13, 2017.

Source: FactSet. Important data provider notices and terms available at www.franklintempletondatasources.com.

Currencies &

Com

modities

67

4.12%

2.65%2.52%

1.13% 1.04% 0.97%

0.65%

-0.25%-0.5%

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

4.0%

4.5%

AustralianDollar

South KoreanWon

Canadian Dollar EURO Brazil Real Swiss Franc Chinese Yuan Indian Rupee

2017 YTD Percentage Returns of Currencies vs US Dollar


Commodities Year-to-Date Performance

Currencies &

Com

modities

Commodities YTD Returns As of January 13, 2017

Source: FactSet, Commodity Research Bureau, Dow Jones & Company, London Platinum & Palladium Market, London Metal Exchange, US Department of Agriculture.


-3% -3%

-9%

13%

9%

4% 3%

6% 5%4%

1% 0%

6%

4%

2%

-15%

-10%

-5%

0%

5%

10%

15%

Cru

de

Oil

Co

al

Nat

ura

l Gas

(Hen

ry H

ub

)

Pal

lad

ium

Pla

tin

um

Go

ld

Silv

er

Zin

c

Co

pp

er

Alu

min

um

Nic

kel

Tin

Wh

eat

So

ybea

n

Co

rn

Energy Precious Metals Industrial Metals Agriculture


Value of Trade-Weighted US Dollar

Source: FactSet, Federal Reserve System. Important data provider notices and terms available at www.franklintempletondatasources.com.

Currency Trends Have Historically Lasted Several Years

Currencies &

Com

modities

69


US Dollar per Euro (EURUSD)

1 Source: FactSet, WM/Reuters.

2 Source: FactSet, Oxford Economics.


Currencies &

Com

modities

70


Japanese Yen per US Dollar (USDJPY)




Currencies &

Com

modities

71


US Dollar per British Pound (GBPUSD)




Currencies &

Com

modities

72


US Dollar per Australian Dollar (AUDUSD)




Currencies &

Com

modities

73


British Pound per Euro (EURGBP)




Currencies &

Com

modities

74


Energy Prices

Sources: FactSet, Dow Jones & Company, Commodity Research Bureau. Important data provider notices and terms available at www.franklintempletondatasources.com.

Natural Gas (Henry Hub) as of 02/17/17

Latest 2.75

1 Month (% Chg) -18.40

3 Months (% Chg) 16.03

6 Months (% Chg) -0.36

YTD (% Chg) -25.88

1 Year (% Chg) 42.49

5 Years (Cumulative % Chg) 2.80

Currencies &

Com

modities

WTI Crude Oil as of 02/17/17

Latest 53.43

1 Month (% Chg) 1.87



YTD (% Chg) -0.60

1 Year (% Chg) 74.15

5 Years (Cumulative % Chg) -48.25

75


Gold

*Log Scale

Sources: FactSet, Dow Jones & Company, US Department of Labor. Important data provider notices and terms available at www.franklintempletondatasources.com.

2/17/2017 Latest

(% Chg)

1 Month

(% Chg)

3 Months

(% Chg)

6 Months

(% Chg)

YTD

(% Chg)

1 Year

(Cumulative % Chg)

5 Years

Gold 1241.95 2.13 1.24 -7.55 8.38 2.64 -27.92

Currencies &

Com

modities

76


Aluminium & Silver

*Log Scale

Sources: FactSet, London Metal Exchange, Dow Jones & Company. Important data provider notices and terms available at www.franklintempletondatasources.com.

17-Feb-17

Latest 18.01



6 Months (% Chg) -8.00

YTD (% Chg) 10.87

1 Year (% Chg) 18.07


17-Feb-17

Latest 1865.50




YTD (% Chg) 8.87

1 Year (% Chg) 22.73


Currencies &

Com

modities

77


200

400

600

800

1,000

1,200

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

$/tn

Steel 2

(Spot USD/Tonne)From 09-May-06 to 20-Feb-Jan-17 (Daily)

Copper & Steel

1 Source: FactSet, London Metal Exchange. Important data provider notices and terms available at www.franklintempletondatasources.com.

2 Source: Bloomberg.

17-Feb-17

Latest 5,939.00




YTD (% Chg) 7.96

1 Year (% Chg) 30.18


Currencies &

Com

modities

78

Latest 622




YTD (% Chg) 5.78

1 Year (% Chg) 55.11


02/20/2017


LME Metals Index

Industrial Metals Prices (Aluminium, Copper, Lead, Nickel, Tin, Zinc)

50

100

150

200

250

300

350

400

450

500

56 59 62 65 68 71 74 77 80 83 86 89 92 95 98 01 04 07 10 13 16

Ind

ex

Reuters/Jefferies CRB® Index (1967=100)2

From September 30, 1956 to January 31, 2017 (Monthly close; US$)

1 Source: FactSet, London Metal Exchange. Important data provider notices and terms available at www.franklintempletondatasources.com.

2 Source: Bloomberg.

Currencies &

Com

modities

79



Franklin Templeton Investments Australia Fund Range

FIXED INCOME

• Franklin Templeton Multisector Bond Fund

• Templeton Global Bond Plus Fund

• Franklin Templeton Global Aggregate Bond Fund

• Franklin Australian Absolute Return Bond Fund

EQUITY

• Franklin Global Growth Fund

• Franklin Templeton Australian Equity Fund

• Templeton Global Equity Fund

80


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225328) issues this publication for the benefit of the category of person described below for information purposes only and

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Any research and analysis contained in this presentation has been procured by Franklin Templeton for its own purposes and

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Important Information

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