Sonal Desai, fixed‑income chief investment officer at Franklin Templeton (NYSE:BEN), says the Iran conflict monopolises attention but that its real market significance lies in how it interacts with two underlying shifts: deglobalisation and a productivity‑boosting innovation cycle.
She argues deglobalisation raises costs and structural inflation while faster productivity, driven by technologies such as generative artificial intelligence and unevenly distributed globally, lifts the neutral real rate particularly in the United States, so both trends work to push yields up.
Desai notes the IMF put forward a range of downside scenarios and warned of lasting damage if conflict prolongs, yet markets look less pessimistic with equities near record highs and credit spreads tight, and if a truce holds and shipping normalises the immediate economic hit may be contained by lower energy intensity and US energy independence.
"For investors, risks to longer‑term yields remain biased to the upside, with volatility ahead," she said, and she continues to favour shorter duration, cautious credit exposure and selective opportunities, including in emerging markets.
