Insights

Clearbridge Investments: With the market and FOMC suggesting the rate hike cycle is complete, the first interest rate cut could come by May 2024, a pause consistent with the Fed’s “higher for longer” messaging.

ClearBridge Investments: Despite a surprisingly good GDP in the last quarter, we remain cautious as consumption has historically remained strong right up until or even past the start of previous recessions.

ClearBridge Investments: The toughest test for investors lies ahead as stimulus and consumer resilience fade while lagged effects of rate hikes take hold.

ClearBridge Investments believe the 10-year U.S. Treasury yield is likely to stabilize and decline in the coming year, supporting equity market valuations and influencing leadership.

ClearBridge Investments: Despite improving economic sentiment now leaning the consensus view toward a soft landing, we continue to believe a recession is on the horizon.

ClearBridge Investments: The second half could see a tug of war between market expectations for a soft landing and more cautious economic forecasts.

ClearBridge Investments: Despite continued strong headline numbers suggesting labor market resilience, we believe an upward trend in initial jobless claims signals weakness ahead.

ClearBridge Investments: The Recession Risk Dashboard saw three negative signal changes this month, suggesting a significant downshift in the economy.

ClearBridge Investments: A string of bank failures in March marked the arrival of the first lagged effect from aggressive rate hikes.

ClearBridge Investments evaluates the latest efforts to stem the banking crisis, discusses long-term regulatory implications and analyzes the likely winners and losers of bank deposit redistribution.

ClearBridge Investments: The evolution of risks to financial stability will be a key factor into the Fed’s near-term thinking above and beyond their goal of achieving the dual mandate of price stability and maximum employment.

ClearBridge Investments continue to believe a recession is more likely than a soft landing, given many of these data points are lagging or coincident in nature.

ClearBridge Investments: While the housing market has been on the leading edge of the current downturn, the threat of higher interest rates will likely be somewhat muted as borrowers shift away from adjustable-rate mortgages.

ClearBridge Investments: The timing and depth of a downturn could be impacted by the Fed’s response to lagging indicators.

ClearBridge Investments: While the labor market remains an economic bright spot, the Federal Reserve (Fed) may continue its tightening policy until more signs emerge that job growth and wages are experiencing substantial slowdowns.

ClearBridge Investments: Given the historical bump for stocks following midterm elections, the current countertrend rally could have legs as political uncertainties abate.

Similar to past recessionary drawdowns, ClearBridge Investments believe the bottoming process for equities will take time to unfold.

ClearBridge Investments: The dashboard worsened from yellow to red in August after the Fed reaffirmed its intention to stamp out inflation by keeping policy restrictive for a prolonged period.

ClearBridge Investments: It remains to be seen if the Federal Reserve will actually pivot in the face of a slowing economy, particularly if inflation remains elevated.

ClearBridge Investments: The current bear market is in its early stages with multiple compression driving losses so far. Where equities ultimately bottom will depend on how well the economy holds up and the trajectory of corporate earnings.

ClearBridge Investments: The push to halt biodiversity loss is increasingly demanding attention alongside climate change as a major environmental concern for investors.

ClearBridge Investments encourages assessment and disclosure of nature-related impacts and dependencies across the value chain.

ClearBridge Investments: There are meaningful things that companies can do to reduce biodiversity harm that can also be revenue opportunities.

Despite challenging global economic and market conditions, there are compelling opportunities within global listed infrastructure, according to Shane Hurst, Portfolio Manager with ClearBridge Investments. He explores how the trends of decarbonization, reshoring and 5G evolution are impacting the space, and how the nature of listed infrastructure can offer some insulation against high inflation.

ClearBridge Investments: Infrastructure’s defensiveness and ability to provide long-term capital growth make it stand out in an environment of macroeconomic uncertainty and higher bond yields.

ClearBridge Investments believe infrastructure’s focus on cash flows and underlying earnings makes it a prudent investment as economic conditions deteriorate, and a recession looms.

ClearBridge Investments: Actions to mitigate and adapt to climate change will disrupt many sectors, creating both winners and losers.

ClearBridge Investments: While misconceptions surrounding its risks have made it controversial, we believe nuclear energy is a safe, reliable, efficient and environmentally-friendly base power source to complement greater renewables penetration.

ClearBridge Investments expect dire need for infrastructure spending to underpin growth for the next decade and beyond.

ClearBridge Investments: Public policy, fiscal policy and secular growth should extend opportunities for lower-volatility listed infrastructure investment for many years.

Infrastructure has recently seen increased attention as broad equities have been weaker in 2022 due to inflation, rising interest rates, global supply chain disruptions from COVID-19 and the war in Ukraine. Shane Hurst, Portfolio Manager with ClearBridge Investments, discusses the opportunities and potential income benefits for investors in the space today.

ClearBridge Investments: The push to halt biodiversity loss is increasingly demanding attention alongside climate change as a major environmental concern for investors.

ClearBridge Investments encourages assessment and disclosure of nature-related impacts and dependencies across the value chain.

ClearBridge Investments: There are meaningful things that companies can do to reduce biodiversity harm that can also be revenue opportunities.

ClearBridge Investments: Infrastructure’s defensiveness and ability to provide long-term capital growth make it stand out in an environment of macroeconomic uncertainty and higher bond yields.

ClearBridge Investments: Clarity over customs clearance and IRA capture rules as well as deflation in the supply chain should help utility solar bask in the sun.

ClearBridge Investments believe infrastructure’s focus on cash flows and underlying earnings makes it a prudent investment as economic conditions deteriorate, and a recession looms.

ClearBridge Investments: Actions to mitigate and adapt to climate change will disrupt many sectors, creating both winners and losers.

ClearBridge Investments: Incorporation of ESG is a critical part of fiduciary duty, and transparently providing clients with investment options that align with their objectives is good business and client focused.

ClearBridge Investments: While misconceptions surrounding its risks have made it controversial, we believe nuclear energy is a safe, reliable, efficient and environmentally-friendly base power source to complement greater renewables penetration.

ClearBridge Investments: We can look forward to more efficient and transparent sustainable investing in 2023. Through active investment and engagement, ESG should maintain and grow its prominence in the business landscape.

ClearBridge Investments: ESG investing faces a meaningful challenge, as facilitating the energy transition must rely on extractive industries with significant negative externalities such as metals and mining.

ClearBridge Investments: The Inflation Reduction Act offers strong tailwinds in the renewable energy and electric vehicle supply chains, as well as tailwinds for solutions in buildings and energy efficiency.

Perspectives from our specialist investment managers on the challenge of feeding a growing global population in the midst of climate change, geopolitical shocks, and uncertainty and the critical need for innovation in food and agricultural technologies.

ClearBridge Investments expects market leadership to broaden in 2024 and believe high-quality defensive stocks will hold up better than the current mega cap leaders in an economic downturn.

John Baldi, Portfolio Manager at ClearBridge Investments, examines the evolving US equity income landscape and shares his strategies for generating income and growth, while also aiming to manage risk in uncertain economic and market conditions.

ClearBridge Investments: Despite improving economic sentiment now leaning the consensus view toward a soft landing, we continue to believe a recession is on the horizon.