ClearBridge Value Strategy Q1 2025 Commentary

2025-04-09 07:00:00 ET

Summary

• The biggest tail risk we are facing is a full-on trade war, which is why the market reacted so negatively to the so-called Liberation Day tariffs.
• The Strategy underperformed for the quarter as stock selection, driven by detractors in the energy and financials, overcame contributions from our overweight to energy and underweight to IT.
• Our 'team of rivals' philosophy drove our returns coming out of the COVID crisis five years ago, and it will help guide us through and capitalize on current tariff turmoil.

By Reed Cassady, CFA, Sam Peters, CFA & Jean Yu, CFA, Ph.D.

Market Overview

Wanderers on a rocky precipice above a sea of fog — like the subject of Caspar David Freidrich’s wonderful 19th-century painting Wanderer above the Sea of Fog — might aptly describe investors today, navigating complex landscapes with limited visibility and irreducible uncertainty. In many ways, our key task as an investment team is to process and reduce as much of this uncertainty as possible as we observe events and to discover real opportunities where asset values do not fully reflect fundamentals. Achieving this is immensely challenging right now as for most of our careers the primary goal of government policy has been to offset negative exogenous shocks and to stabilize excesses. This stabilization has been reversed completely with the recent negative surprise of the highest tariffs in almost a century. Policy has morphed into a destabilizing shock and a source of immense uncertainty. Despite this extremely foggy market landscape, our task remains unchanged....

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