Franklin Templeton Fixed Income Macro Views: AI tailwinds, geopolitical headwinds

US growth remains resilient despite political noise, energy shocks and shifting Fed expectations, with consumers, corporate earnings and AI‑driven capex still anchoring the expansion. The AI story is evolving from broad enthusiasm to more selective scrutiny, rewarding firms that embed AI into workflows while raising disruption risk for parts of the software sector and concentrating wealth effects among older, equity‑rich households. At the same time, hyperscalers’ move toward debt‑funded data‑center investment looks more like a rational balance-sheet evolution than a sign of stress, though it adds another layer of leverage to an already AI‑heavy market narrative.

Globally, geopolitics and energy prices are reviving inflation concerns: in Europe they threaten to slow an already fragile recovery and keep yields structurally higher even if outright recession is avoided; in Japan they complicate a “slow and steady” upturn built on policy support, modest rate hikes and productivity‑oriented capex. Across regions and currencies—from a safe-haven but less exceptional US dollar to range-bound euro dynamics and a still-depressed yen—the common thread for investors is an environment of slower but ongoing growth, higher macro volatility and greater dispersion across assets where security selection around AI exposure, rate sensitivity and policy paths will be critical.