Hasenstab, co-director of international fixed income at Franklin Templeton, says that if US politicians fail to act before 2013, the sweeping spending cuts and tax hikes scheduled to take effect at the start of next year could push the economy in to recession.
While he says the world’s leading economy will likely delay some of the proposed spending cuts due to come in on 1 January 2013, Hasenstab warns the country will "at some point have to pay the price for fiscal irresponsibility".
"I think many politicians seem to be in denial and perhaps don’t understand the magnitude of the problem," he said.
"It’s possible some of the proposed cuts will be postponed and some of the tax hikes will be moderated. This wouldn’t solve the long-term fiscal issues, so we’d still have to face that, but in the short-term it probably would help mitigate – at least somewhat – the negative growth consequences."
Since the average Global fund holds roughly 45 per cent in North American equities, UK investors cannot afford to ignore the impact of the potential economic fallout in the US.
Hasenstab says they should not discount the possibility of higher interest rates in the near-term.
"We don’t have to look too far, to Europe, to find out what could happen to Treasury yields if the market loses confidence in long-term fiscal programmes," he continued.
Hasenstab co-manages Franklin Templeton’s $42.4bn Global Bond fund, 32.57 per cent of which is invested in European paper.
The fund has a limited exposure to the US, with only 5.81 per cent of the portfolio invested in the Americas.
Franklin Templeton Global Bond has returned 59.47 per cent over a five-year period, marginally outperforming the IMA Global Bond sector average of 55.19 per cent, according to FE Analytics.
However, the fund has underperformed the benchmark, the JP Morgan Global Government Bond index, which returned 62.02 per cent over this period. It has been significantly less volatile though.
Performance of fund vs sector and benchmark over 5 yrs
Source: FE Analytics
The fund has a minimum investment of £5,000 and a minimum top-up of £1,000. It has an annual management charge (AMC) of 1.05 per cent and a total expense ratio (TER) of 1.4 per cent.