April 24, 2025 • 8 mins
Jenny Johnson, CEO of Franklin Templeton Investments, discusses asset allocation as the investing and business environment remains highly uncertain and volatile. She speaks with Bloomberg's Jonathan Ferro, Lisa Abramowicz, and Annmarie Hordern.
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Speaker 1 (00:02):
Bloomberg Audio Studios, podcasts, radio news.
Speaker 2 (00:08):
We begin this now with stockslower as investors away clarity
on trade talks. Jenny Johnson, the CEO of Franklin Sempleson,
one of the world's largest investment managers, joined us now
for more.
Speaker 1 (00:17):
Jenny's good to see you. It's great to be here.
Thanks for having me.
Speaker 2 (00:19):
Things have changed a lot since we caught up with
you in Davos, Switzerland. It's a lot of optimism. You
remember everyone was charged as exceptionalism. Well, strowth, lots of
hiring markets are great. Things have changed a lot. Have
they changed for you?
Speaker 3 (00:31):
Well, you know, I actually we talked about it at
the time. You know, I think that you have to
think through kind of where the president is, right, He's
come in with a plan.
Speaker 1 (00:42):
It's been very clear, right, it's.
Speaker 3 (00:43):
Taxes, immigration, tariffs, government efficiency and deregulation, right and so,
and he has about a year and a half to
get those things done before the midterms come in. And so,
you know, from the tariff standpoint, again, he's a deal maker.
So when you are trying to make a deal, you
need to show that you are in the position of strength, right.
(01:04):
So a lot of this blistering is around. I'm in
a position of strength and you're going to have to
bow to my will. I think the challenge has been
There are some unintended consequences of that. I was talking
to somebody yesterday about Canadians. They're so they're not upset
about the terroifts, they're upset about the fifty first state comment,
and that Airbnbs in Rhode Island are down because the
Canadians say, I'm not going to come visit the US.
(01:25):
So those are the undertendant consequences.
Speaker 1 (01:27):
The other piece of this is.
Speaker 3 (01:29):
He needs the tax revenues identified in tariffs to help
fund his tax cuts, which, by the way, are not
tax cuts really, they're extensions. And if we don't get
that extension, there is a massive tax increase that happens,
which really becomes an issue around the economy.
Speaker 2 (01:46):
Can you describe how you and the same thing the
endgame looks like? What do you think it looks like?
Because some people have described the last few weeks as madness.
Is there a method to it?
Speaker 1 (01:54):
Yeah?
Speaker 3 (01:54):
So I think what we hope to see, you'd like
to see a couple of deals done right to show
that he's willing to come to the table and make
a deal.
Speaker 1 (02:01):
Right, so we can see a deal.
Speaker 3 (02:02):
With Japan or Vietnam or you know somewhere to show no, no, no,
he's playing his deals.
Speaker 1 (02:07):
You'd like to know who is responsible.
Speaker 3 (02:10):
Remember it was Paul Ryan who ushered the first tax
cuts through, Like who's responsible for ushering that legislation through
and champion that that'll be very important because he's got
to get those done. And the question is how quickly
can he get it done? To calm the markets, because
what we've seen is, you know, look at you when
you suddenly have CEOs who say I can't give guidance
because there's so much uncertainty. That uncertainty makes them fear,
(02:33):
and then they stop making investments. If you stop making investments,
it slows down the economy. Right, So I think what
we need to see in the next ninety days is
some clarity in the meantime uncertainty.
Speaker 4 (02:43):
It leads to a lot of conspiracy theories and lots
of other types of speculation. As someone who oversees one
and a half trillion dollars of assets, how much of
a material shift have you seen with customers consumers shifting
just slightly away from US assets to insulate from some
of the whip side and the uncertainty.
Speaker 3 (03:02):
You definitely see, you know, non Americans reducing on the
institutional side some of their exposure to US equities.
Speaker 1 (03:10):
Okay, so we've seen that a bit.
Speaker 3 (03:12):
But on your hand, you know, you sort of you
if you are in the market now, this is not
the time to get out of the market, right.
Speaker 1 (03:19):
You need to play this out.
Speaker 3 (03:20):
And if you hadn't made the trade to being in
more defensive stocks, then there's no point in doing that now,
right because you've already sort of missed it.
Speaker 1 (03:29):
So you know, the reality is AI.
Speaker 3 (03:32):
I actually played around this weekend with an app called
replet where you can just use natural language processing to
have it code and generate an app for you. Like
the efficiencies are income from AI, we haven't seen those
kind of productivity gains yet. The productivity gains that we're
seeing are coming from technologies that came out twenty years ago,
and so as those things play into companies, I think
(03:53):
you'll see real opportunity.
Speaker 4 (03:54):
You know, one thing that I hear from you, and
I heard from Mike Wilson of mart and Stanley earlier
this morning, was that corporate America has a lot of
good about it in terms of strength, in terms of resilience,
in terms of technological progress. It's the question about other
dollar denominated assets, and I'm talking about treasuries, I'm talking
about government debt, especially given some of what you were
talking about with respect to who is driving some of
these bunch of proposals through Congress.
Speaker 1 (04:17):
That really is the issue. How much have you seen.
Speaker 4 (04:19):
That bid get called into question as institutions, particularly foreign
ones move away.
Speaker 3 (04:24):
Well, I think there's a question of you know, how
much are you know, foreign governments pulling away from treasuries?
And you know, is that is that what we're seeing
the treasury market? Or are we seeing the unwinding of
the basis point? They are the basis trade and so
you know, Look, then the question falls into will is
the reserve?
Speaker 1 (04:42):
US is the reserve currency? At question? Look, is not
where else she going to go?
Speaker 2 (04:46):
Right?
Speaker 3 (04:46):
The US is going to be the reserve currency. People
will say, well, China trade has gone up to two percent. Yeah,
it's come from four to six percent of trade. Right,
you know, it'll chip away at it, but we are
still going to continue to be the reserve currency.
Speaker 5 (04:57):
You mentioned a lot of non US and ves there
is pulling back from the United States. Morning Star had
research out this week that said some of that is
actually patriotic rebalancing from capital from America to Europe. Do
you think it's that emotional for some of these.
Speaker 3 (05:10):
People, Well, you know, just again talking to folks from
Canada who are so fundamentally offended by the comment of
you know, the fifty first state.
Speaker 1 (05:21):
Yeah, it's emotional, right. They kind of get it on.
Speaker 3 (05:25):
The trade and tariffs and we can deal and you
want help on immigration.
Speaker 1 (05:28):
But a comment like.
Speaker 3 (05:29):
That has obviously you had that kind of nationalists response.
Speaker 5 (05:31):
What are the long term impacts of feelings like that?
Speaker 3 (05:36):
You know, who's at a dinner last night, we're you know,
debating does that push Europe to China?
Speaker 1 (05:42):
I don't think it, you know, obviously.
Speaker 3 (05:43):
I think what it does is there's the joke of
you know, it's not Mega, it's Mega make Europe great again, right,
It forces Europe to do things like more defense independence,
more energy independence. Look, there's been a lot of brilliant
talent in Europe. Why are we not seeing these unicorn
companies from a technological and a lot of people say
it's the regulation and it's some of the policies that
(06:06):
they have in Europe. And so if this forces Europe
to be more resilient on its own, that's actually a
good thing for Europe. I don't think it necessarily they
don't suddenly trust China much. We're we're already trading with China.
But it forces them to say, you know what, we
have to stand on our own a little bit more.
Speaker 2 (06:23):
It's why we're seeing some investors rebalance towards Europe since
the start of the year. I wanted to build on
some of Lisa's questions, and I think this is an
important line of questioning. At the moment, some investors aren't
drawing a distinction between risk assets in America and the
safe haven asset in America. It's trading as one bucket
dollar denominated assets. And I wonder, from your perspective, when
that a dynamic starts to take hold of the country,
(06:44):
whether that's a risk you need to actively manage or
a dislocation you take advantage of.
Speaker 1 (06:49):
Which one is it at the moment?
Speaker 3 (06:50):
Well, I think anytime that it becomes a risk on,
risk off in a big block, and yet you know
the underlying fundamentals are different in kind of an investment
that's that actually becomes a great investment opportunity. So I
think you have to look at it and unpack those Do.
Speaker 2 (07:04):
You think that's what this is right now and it's
the opportunity in stocks or bonds With that.
Speaker 3 (07:08):
In mind, I think you know right now it's it's
it's almost a market reacting to just a headline statement, right,
and so it's it's really sort of on and off.
Speaker 1 (07:17):
It's a risk on, risk off. I think that from a.
Speaker 3 (07:21):
You know, the dollar was was someone would say overvalued,
who knows, right, and it's come down a fair bit.
I think there are a lot of people that were
the US uh the debt and the deficit, you know,
thought that it was overvalued, and so probably in this
there's a little bit of that coming, you know, some
of that frothy ness coming off.
Speaker 2 (07:38):
What's your advice to people right now who were part
of that dollar bit. They've built up that massive dollar
long over the period of a decade across asset classes,
in both equities and fixed income, and they're nervous about
the policy in Washington and looking to reallocate. What do
you suggesting they do.
Speaker 3 (07:51):
I think it depends on where you're if you if
you're a dollar based economy, I think that's okay. You
don't have to worry about that. If you're not a
dollar based economy, you have to understand how that's going
to impact your investments.
Speaker 2 (08:01):
Certainly been something that the Europeans about to think about over
the last few months, that's for sure. Jenny, it's good
to see you lost to talk about. I can't imagine
how much has changed the next time we spoke speak
Jennie Johnson there the Franklin Templeton CEO, on the latest
in this market.
Bloomberg Audio Studios, podcasts, radio news.
Speaker 2 (00:08):
We begin this now with stockslower as investors away clarity
on trade talks. Jenny Johnson, the CEO of Franklin Sempleson,
one of the world's largest investment managers, joined us now
for more.
Speaker 1 (00:17):
Jenny's good to see you. It's great to be here.
Thanks for having me.
Speaker 2 (00:19):
Things have changed a lot since we caught up with
you in Davos, Switzerland. It's a lot of optimism. You
remember everyone was charged as exceptionalism. Well, strowth, lots of
hiring markets are great. Things have changed a lot. Have
they changed for you?
Speaker 3 (00:31):
Well, you know, I actually we talked about it at
the time. You know, I think that you have to
think through kind of where the president is, right, He's
come in with a plan.
Speaker 1 (00:42):
It's been very clear, right, it's.
Speaker 3 (00:43):
Taxes, immigration, tariffs, government efficiency and deregulation, right and so,
and he has about a year and a half to
get those things done before the midterms come in. And so,
you know, from the tariff standpoint, again, he's a deal maker.
So when you are trying to make a deal, you
need to show that you are in the position of strength, right.
(01:04):
So a lot of this blistering is around. I'm in
a position of strength and you're going to have to
bow to my will. I think the challenge has been
There are some unintended consequences of that. I was talking
to somebody yesterday about Canadians. They're so they're not upset
about the terroifts, they're upset about the fifty first state comment,
and that Airbnbs in Rhode Island are down because the
Canadians say, I'm not going to come visit the US.
(01:25):
So those are the undertendant consequences.
Speaker 1 (01:27):
The other piece of this is.
Speaker 3 (01:29):
He needs the tax revenues identified in tariffs to help
fund his tax cuts, which, by the way, are not
tax cuts really, they're extensions. And if we don't get
that extension, there is a massive tax increase that happens,
which really becomes an issue around the economy.
Speaker 2 (01:46):
Can you describe how you and the same thing the
endgame looks like? What do you think it looks like?
Because some people have described the last few weeks as madness.
Is there a method to it?
Speaker 1 (01:54):
Yeah?
Speaker 3 (01:54):
So I think what we hope to see, you'd like
to see a couple of deals done right to show
that he's willing to come to the table and make
a deal.
Speaker 1 (02:01):
Right, so we can see a deal.
Speaker 3 (02:02):
With Japan or Vietnam or you know somewhere to show no, no, no,
he's playing his deals.
Speaker 1 (02:07):
You'd like to know who is responsible.
Speaker 3 (02:10):
Remember it was Paul Ryan who ushered the first tax
cuts through, Like who's responsible for ushering that legislation through
and champion that that'll be very important because he's got
to get those done. And the question is how quickly
can he get it done? To calm the markets, because
what we've seen is, you know, look at you when
you suddenly have CEOs who say I can't give guidance
because there's so much uncertainty. That uncertainty makes them fear,
(02:33):
and then they stop making investments. If you stop making investments,
it slows down the economy. Right, So I think what
we need to see in the next ninety days is
some clarity in the meantime uncertainty.
Speaker 4 (02:43):
It leads to a lot of conspiracy theories and lots
of other types of speculation. As someone who oversees one
and a half trillion dollars of assets, how much of
a material shift have you seen with customers consumers shifting
just slightly away from US assets to insulate from some
of the whip side and the uncertainty.
Speaker 3 (03:02):
You definitely see, you know, non Americans reducing on the
institutional side some of their exposure to US equities.
Speaker 1 (03:10):
Okay, so we've seen that a bit.
Speaker 3 (03:12):
But on your hand, you know, you sort of you
if you are in the market now, this is not
the time to get out of the market, right.
Speaker 1 (03:19):
You need to play this out.
Speaker 3 (03:20):
And if you hadn't made the trade to being in
more defensive stocks, then there's no point in doing that now,
right because you've already sort of missed it.
Speaker 1 (03:29):
So you know, the reality is AI.
Speaker 3 (03:32):
I actually played around this weekend with an app called
replet where you can just use natural language processing to
have it code and generate an app for you. Like
the efficiencies are income from AI, we haven't seen those
kind of productivity gains yet. The productivity gains that we're
seeing are coming from technologies that came out twenty years ago,
and so as those things play into companies, I think
(03:53):
you'll see real opportunity.
Speaker 4 (03:54):
You know, one thing that I hear from you, and
I heard from Mike Wilson of mart and Stanley earlier
this morning, was that corporate America has a lot of
good about it in terms of strength, in terms of resilience,
in terms of technological progress. It's the question about other
dollar denominated assets, and I'm talking about treasuries, I'm talking
about government debt, especially given some of what you were
talking about with respect to who is driving some of
these bunch of proposals through Congress.
Speaker 1 (04:17):
That really is the issue. How much have you seen.
Speaker 4 (04:19):
That bid get called into question as institutions, particularly foreign
ones move away.
Speaker 3 (04:24):
Well, I think there's a question of you know, how
much are you know, foreign governments pulling away from treasuries?
And you know, is that is that what we're seeing
the treasury market? Or are we seeing the unwinding of
the basis point? They are the basis trade and so
you know, Look, then the question falls into will is
the reserve?
Speaker 1 (04:42):
US is the reserve currency? At question? Look, is not
where else she going to go?
Speaker 2 (04:46):
Right?
Speaker 3 (04:46):
The US is going to be the reserve currency. People
will say, well, China trade has gone up to two percent. Yeah,
it's come from four to six percent of trade. Right,
you know, it'll chip away at it, but we are
still going to continue to be the reserve currency.
Speaker 5 (04:57):
You mentioned a lot of non US and ves there
is pulling back from the United States. Morning Star had
research out this week that said some of that is
actually patriotic rebalancing from capital from America to Europe. Do
you think it's that emotional for some of these.
Speaker 3 (05:10):
People, Well, you know, just again talking to folks from
Canada who are so fundamentally offended by the comment of
you know, the fifty first state.
Speaker 1 (05:21):
Yeah, it's emotional, right. They kind of get it on.
Speaker 3 (05:25):
The trade and tariffs and we can deal and you
want help on immigration.
Speaker 1 (05:28):
But a comment like.
Speaker 3 (05:29):
That has obviously you had that kind of nationalists response.
Speaker 5 (05:31):
What are the long term impacts of feelings like that?
Speaker 3 (05:36):
You know, who's at a dinner last night, we're you know,
debating does that push Europe to China?
Speaker 1 (05:42):
I don't think it, you know, obviously.
Speaker 3 (05:43):
I think what it does is there's the joke of
you know, it's not Mega, it's Mega make Europe great again, right,
It forces Europe to do things like more defense independence,
more energy independence. Look, there's been a lot of brilliant
talent in Europe. Why are we not seeing these unicorn
companies from a technological and a lot of people say
it's the regulation and it's some of the policies that
(06:06):
they have in Europe. And so if this forces Europe
to be more resilient on its own, that's actually a
good thing for Europe. I don't think it necessarily they
don't suddenly trust China much. We're we're already trading with China.
But it forces them to say, you know what, we
have to stand on our own a little bit more.
Speaker 2 (06:23):
It's why we're seeing some investors rebalance towards Europe since
the start of the year. I wanted to build on
some of Lisa's questions, and I think this is an
important line of questioning. At the moment, some investors aren't
drawing a distinction between risk assets in America and the
safe haven asset in America. It's trading as one bucket
dollar denominated assets. And I wonder, from your perspective, when
that a dynamic starts to take hold of the country,
(06:44):
whether that's a risk you need to actively manage or
a dislocation you take advantage of.
Speaker 1 (06:49):
Which one is it at the moment?
Speaker 3 (06:50):
Well, I think anytime that it becomes a risk on,
risk off in a big block, and yet you know
the underlying fundamentals are different in kind of an investment
that's that actually becomes a great investment opportunity. So I
think you have to look at it and unpack those Do.
Speaker 2 (07:04):
You think that's what this is right now and it's
the opportunity in stocks or bonds With that.
Speaker 3 (07:08):
In mind, I think you know right now it's it's
it's almost a market reacting to just a headline statement, right,
and so it's it's really sort of on and off.
Speaker 1 (07:17):
It's a risk on, risk off. I think that from a.
Speaker 3 (07:21):
You know, the dollar was was someone would say overvalued,
who knows, right, and it's come down a fair bit.
I think there are a lot of people that were
the US uh the debt and the deficit, you know,
thought that it was overvalued, and so probably in this
there's a little bit of that coming, you know, some
of that frothy ness coming off.
Speaker 2 (07:38):
What's your advice to people right now who were part
of that dollar bit. They've built up that massive dollar
long over the period of a decade across asset classes,
in both equities and fixed income, and they're nervous about
the policy in Washington and looking to reallocate. What do
you suggesting they do.
Speaker 3 (07:51):
I think it depends on where you're if you if
you're a dollar based economy, I think that's okay. You
don't have to worry about that. If you're not a
dollar based economy, you have to understand how that's going
to impact your investments.
Speaker 2 (08:01):
Certainly been something that the Europeans about to think about over
the last few months, that's for sure. Jenny, it's good
to see you lost to talk about. I can't imagine
how much has changed the next time we spoke speak
Jennie Johnson there the Franklin Templeton CEO, on the latest
in this market.
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