YLDE - ClearBridge Q2 2024 Strategy Commentary

2024-04-09 02:52:00 ET

Summary

• ClearBridge is a leading global asset manager committed to active management. Research-based stock selection guides our investment approach, with our strategies reflecting the highest-conviction ideas of our portfolio managers.
• The distinct nature of the current economic cycle appears to have tripped up many traditional recession indicators. Several leading indicators have improved over the last six months, including an upgrade of the ClearBridge Recession Risk Dashboard to yellow from red.
• Longer-term shifts such as increased use of fiscal stimulus throughout the economic cycle have helped boost activity over the past few years. Looking ahead, easier lending standards and a pickup in housing activity should help power the economy to a soft landing.
• After a period of historical market concentration, the superior earnings growth of the Magnificent Seven is expected to converge toward the market average over the next two years. This could spark a leadership rotation and broader market participation among the remaining stocks in the S&P 500 as well as small caps.

By Jeffrey Schulze, CFA

The Long View: A Unique Cycle

Current Expansion Shares Little in Common with History

Billionaire investor Carlos Slim once famously opined, "With a good perspective on history, we can have a better understanding of the past and present, and thus a clear vision of the future." While each economic cycle is unique, they share common elements that can help strategists construct a better mosaic on what to expect moving forward. However, as we progress from a (hopefully) once in a lifetime global pandemic, it has become clear there are more differences between the current economic expansion and history than previously perceived. These divergences have driven an incredibly robust economy over the past two years despite many normally reliable recessionary indicators pointing to an impending downturn. While we remain wary of becoming complacent given numerous risks that abound, the current cycle stands out given the improvement of several leading macroeconomic indicators over the last six months....

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