Perspectives
Stay up-to-date with the current investment and macroeconomic issues at ClearBridge Investments. We provide analyses of the themes and trends which lie at the heart of your investment challenges.
The Long View: A Unique Cycle
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.
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AOR Update: It's Looking Different
Unsynchronised post-pandemic business cycles look to have spoiled recession expectations, with the ClearBridge Recession Risk Dashboard moving from red to yellow, favouring a soft landing.
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AOR Update: Soft Landing Coming into View
The overall reading of the ClearBridge Recession Risk Dashboard, while still in red or recessionary territory, is nearing the threshold for yellow.
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The Long View: Here Comes the Sun?
Several rays of light are showing through the macro clouds, including an increasing likelihood of a soft landing with the Fed being in a more flexible position as inflation moderates and three positive indicator changes for the ClearBridge Recession Risk Dashboard in the last quarter.
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U.S. Economic Outlook: Beware Lagged Effects
The economy is at the crux of this cycle, the most difficult period of headwinds. We expect the lagged effects of Fed tightening to slow economic growth during the first half of 2024 and we continue to maintain our base case of a recession as we move through this period.
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AOR Update: The Fed is Done, What's Next?
With the U.S. market and Federal Open Market Committee suggesting the rate hike cycle is complete, the first rate cut could come by May, a pause consistent with the Fed’s “higher for longer” messaging.
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AOR Update: Not Always a Straight Line Down
Despite better than expected Q3 GDP, we remain cautious as consumption has historically remained strong right up until or even past the start of previous recessions.
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The Long View: The Crux
The toughest test for investors lies ahead as stimulus and consumer resilience fade while lagged effects of rate hikes take hold.
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Higher Deficits to Impact Equity Valuations, Market Leadership
The U.S. interest burden is set to move higher in the coming decade and could eclipse the previous peak seen in the late 1980s and early 1990s.
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AOR Update: Lower Yields, So What?
The 10-year U.S. Treasury yield is likely to decline in the coming year, creating catalysts for equity valuations and influencing market leadership.
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AOR Update: When To Expect A Recession?
Considering the timeline from initial rate hike to contraction, the horizon for a recession could be between mid-2023 and mid-2024.
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The Long View: Who's Right?
2Q23 Commentary: The second half could see a tug of war between market expectations for a soft landing and more cautious economic forecasts.
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