Higher-Growth, Higher-Inflation World Ahead

Franklin Templeton’s global investment survey argues that markets are underestimating both economic resilience and the persistence of structurally elevated inflation into 2026. 

• The firm expects U.S. GDP growth of 2.5% in 2026, above both Bloomberg consensus and IMF forecasts, while forecasting no recession.
• Inflation is expected to remain sticky, with core PCE projected around 3.0–3.5%, limiting the scope for aggressive Federal Reserve rate cuts.
• Franklin Templeton remains bullish on equities — targeting 7400–7800 for the S&P 500 — while favoring technology, industrials, energy, emerging markets, Japan, and shorter-duration credit.

The report ultimately reflects a market regime where growth remains surprisingly firm, but where structurally higher inflation continues to reshape both portfolio construction and central-bank expectations.