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We're standing by with Franklin Templeton President and CEO Jenny Johnson, and.
You know what.
It's at Jenny john on the sidelines there.
Everybody's here. Everybody is here.
And the reality too is everyone is talking about what's going on in the United States right now with the president's tariff plan. How do you see things playing out and what do you think is being underappreciated by investors right now?
Well, I think, first of all, I think Veston is doing a better job at describing this as interlocking engine. Right. It's it's tariffs, it's it's taxes, and its deregulation. And I think that that you know, you got to remember in the US you sort of have eighteen months when you get in.
To make big changes. Otherwise, in the.
You know, Congress is like to flip, but he's not going to get things passed. Right. So if you think about this, the first thing, does he hits tariffs?
I think he's working through to get his tax cuts.
And remember this is really a tax extension with some additional tax cuts. If we don't get the tax extension, it's a massive tax increase, which then becomes an economic problem. Right, he needs to pay for that, So how does he pay for it? He pays for it by tariffs.
So when he first.
Came out with the tarifts, he says that's a six hundred billion dollar revenue increase. Today you get about eighty billion dollars from terriffs. Now, whether it's six hundred and four or whatever, he needs four hundred billion to four or fifty billion a year to get to pay for his tax cuts.
There is tax extensions, so terrafs is a great way to do it.
That's the interlacking nature of this, And when we think about from an economic standpoint, the deregulation is really important, especially as a business. You know, somebody running a global business, and so I think that's the plan. The problem is it's messy because you have to do it all quickly in this sortain eighteen months.
There's also an issue too when it comes to tax cuts and other types of more pro growth policies. Is that going to run into issues with concerns about our budget deficit. We had the budget director on yesterday and there's been a lot.
Of talk as.
To how much can you really afford to do right now? You have one hundred and twenty percent debt to GDP ratio and other metrics that are also eight historical norms.
Listen, there's no question that you know what has happened with a deficit in time.
You want to be able to take.
On to add additional deficits during bad economic times. We've done it during good economic times, which means you have nothing to be able, no leverage if things turned into a recession. So that's a difficult point. But again, as long as he pays for it. How is he going to pay for it. He's going to pay for from changing tax revenues of eighty billion dollars a year from tariffs to four hundred and eighty or you know, five hundred billion, and so as long as it's paid.
For it, that's less of a problem.
And then, of course, you know, the other part of his plan is government efficiency, right, so to be able to reduce the deficit, that's going to be important. We are on a you know, one point eight of two million dollars a year in additional debt that is not sustainable.
I mentioned throughout the course of this conference that that pat is concerning the bond market.
Today. You have a ten year.
Yield that has been drifting higher in the last couple of days. Despite the palm that the Treasury Secretary seems to be providing to the market, the bond market's not quite showing it.
So what does this mean. Do you believe that.
The bond market risks a tantrum if the US financial situation is not figuring out.
I don't know if it's a tantrum, but I do think.
Look, we've you know, our view is you probably get a only one cut this year. But I also think you have to be realistic on the ten year. I mean, I don't think it'd be surprising to have the tenure like four seventy five at the end of the year. Why you have to buy you have to buyers of our debt. The economy is still pretty strong. Ism numbers came in today, you know. I mean a lot of people said, oh, we had this recession. Well we had a recession number because GDP imports people accelerated them.
That's the sort of a false signal.
I think. So, you know, the economy still feels pretty robust. Now, that doesn't mean that we aren't at a really important moment where there's no question.
Businesses are hesitating.
They're hesitating in CAPEC spend because they're concerned about what these tariffs mean to us, and they can without certainty, they can't spend.
If that goes on for too long, you will risk triggering a recession.
Are your investors hesitating at all?
Are they worried right now?
You? So, First of all, most institutions are long term, right, and so they're not gonna deal.
They're not going to.
Make switches because of tactical shifts. They're waiting to see what's going to happen here, right, I mean because any day it kind of you know, jumps up and down. So that's I think most of them are viewing this as all right, we're gonna wait and see. You did European investors pulled back a little bit from the US.
A lot of people said, well, is that because they're annoyed with the US?
No.
I think it's because they realize that.
There are opportunities in Europe defense spending, other areas. And it was the best performing index today. So again, I think most institutional investors and I and actually because we sell through the wealth channel through financial advisors, they tend to be more sort of long term in their thinking and say, listen, if you missed it at the start, there's no point in making those shifts now because it changes every.
Day because you also operate through the wealth channel. I'm really curious about your view on what's happening in private markets right now. Also, since we've been here, we've had a huge range of views. We've had private asset editors say, don't worry about it, everything's fine, the marks are all good, and then we've had others say there's a lot more trouble under the surface.
Where do you.
Stand on that spectrum and how do you consider this moment where so many asset managers are opening up to wealth clients for an asset class.
That's not as in follow exactly No, So, I mean it's interesting.
Look, first of all, fundamentally believe that it is important that we open up the private markets to the wealth channel responsibly, right. I mean, there's a big difference between a pension fund who knows exactly what their cash flow liabilities are for the next thirty years making a commitment to saying I want to put thirty percent or forty percent in private markets, and an individual who may have one year or two years of expenses and savings and locking up those assets.
So education is really important. The type of vehicles are really important. We're working. I love the idea of retirement.
Plans because there's always cash flows coming in, right, people don't tend to stop their payroll contributions and putting kind of a managed account solution which is dealing with the illiquidity risk. But the liquidity risk is very real and it's permanent capital. So in times of stress, people don't you don't get the same pressure the stock market gets, will use it as their liquid So what do you think of.
Some of these new products kind of ETFs and similar types of products that are effectively putting private assets in there but with the mix of public assets to try to address some of those liquidity concerns.
So Franklin Templeton actually in some of our growth products because we're headquartered in Silicon Valley. I mean, honestly, our team, our growth equity team that was there saying, gosh, we're missing these IPO performance kickers that we used to get because companies are waiting so long to go public and so we actually for the last decade have put late stage venture into some of our growth equity mutual funds.
You can do that up to fifteen percent of the mutual fund.
So again, as long as you know your product and you know what your commitment is as far as the liquidity, then that doesn't concern me. What concerns me is when people start to convince themselves that these things are more liquid than they really are, because they're not liquid.
Now, Jenny, I love a business update from you as well. Of course you've been navigating trouble out the west an asset management unit. What's outdating, what's the latest on what's going on and how Franklin tumbltin is turning past that page?
Yeah, so you know, we're working through it.
There's obviously been a change in administration, so as you can imagine a lot of these government agencies, the new leadership takes time for them to get into office, and so we're continuing to work through that process. And you know, I think the good NEWSS we today are an incredibly diverse asset manager.
You know, the one point five train that we.
Have no single investment team accounts for more than I think eleven percent of our revenues. And so actually our Franklin Fixed income team, which wasn't historically, particularly institutional, has had tremendous net flows in there, and so again the key is is to be able to have that.
Stable of capabilities.
We're a top ten alternatives manager. We have massive I think we're we probably have about four hundre and sixty billion in fixed income between private credit and.
Traditional fixed income.
So what makes a so resilient is the ability to have all of this stable of opportunities
Looking forward to seeing how you navigate the year, that is of course Franklin Templeton President and CEO, Jenny Johnn