Global Growth Strategy Commentary August

Market Overview

Global equities delivered mostly positive performance in August, boosted by the prospect of the U.S. joining other developed economies in reducing interest rates. Japan, Asia Ex Japan, Europe Ex U.K. and the United Kingdom bested the 0.8% return in local currency of the benchmark MSCI All Country World Index. North America produced positive absolute returns but trailed the benchmark while emerging markets declined for the month.

After leading for most of 2025, global growth stocks underperformed global value in August, with the MSCI ACWI Growth Index rising 0.12% compared to a return of 1.56% for the MSCI ACWI Value Index.

In the U.S., which represents the largest weight in the benchmark and the Strategy, equity markets extended their rally in August, with major indexes reaching new record highs amid robust corporate earnings, an increasing likelihood of interest rate cuts and continued optimism around AI. Buoyed by the prospect of a Fed rate-cutting cycle, small caps rallied to seize leadership from their larger cap peers, with the Russell 2000 Index handily beating the Russell 1000 Index. Meanwhile the Russell 1000 Value Index meaningfully outperformed the Russell 1000 Growth Index. Federal Reserve Chairman Powell’s Jackson Hole speech underscored the central bank’s cautious stance, noting that while inflation has moderated, it remains above target, and the labor market is showing signs of cooling. Following the speech, futures markets pegged the likelihood of a rate cut at the Fed’s September meeting at 87%. U.S. Treasury yields declined during the month, falling from 4.4% to 4.2%, reflecting market uncertainty over the Fed’s next moves and the broader economic outlook.

Portfolio Highlights

The ClearBridge Global Growth Strategy underperformed the benchmark in August with stock selection in the U.S. the primary detractor.

From a sector standpoint, stock selection in information technology (IT), health care, industrials, communication services and financials had negative impacts. Within IT, Japanese semiconductor equipment maker Tokyo Electron fell sharply after quarterly earnings and revenue missed forecasts. U.S. tax prep software maker Intuit reported strong quarterly results, but the stock was pressured by full year guidance that didn’t surprise to the upside and profit taking on concerns SEO could impact its tax business. Online gaming platform Roblox sold off on social media and investor backlash to its banning of vigilante users who claim they were exposing online predators. Siemens Energy in industrials gave back some gains after a strong run year-to-date on demand for its power transmission equipment.  

On the positive side, stock selection in Asia Ex Japan and overweights to the consumer discretionary and communication services sectors contributed to relative performance. Singapore-based gaming, fintech and e-commerce company Sea Limited was the leading individual contributor, boosted by better-than-expected revenue gains in its latest quarterly results with particular strength in its Shopee e-commerce division. Shares of Australian location and safety software provider Life360 rose strongly on a beat and raise second quarter. Several Chinese holdings also did well, with digital conglomerate Tencent spurred higher by solid earnings results and particular strength in gaming while PC maker Lenovo was lifted by its fastest pace of revenue growth in four years. Spain’s Banco Santander was another leading contributor.

We initiated five positions in August: U.S. advertising software platform AppLovin, Irish-based HVAC services provider Johnson Controls, U.S. cosmetics maker e.l.f. Beauty, U.S. aerospace components manufacturer TransDigm Group and Belgian financial services provider KBC Group. The Strategy also closed four positions: Tokyo Electron, U.S. freight rail operator Union Pacific, U.S. online pet retailer Chewy and U.S. medical device maker Inspire Medical Systems.

Outlook

In addition to a resilient U.S. equity market that in August showed more signs of broadening beyond mega caps to include small cap and value stocks, the regions where we invest continue to make progress on growth and equity-friendly policies. While still early days in the development of more stimulative economic and regulatory policies, earnings growth among stocks in the pan European Stoxx 600 has begun to improve with forecasts for double-digit EPS growth over the next year. The U.S., meanwhile, is expected to see earnings growth reaccelerate in 2026, buoyed by fiscal stimulus, greater clarity on tariffs and modest interest rates cuts that could lead to renewed M&A activity. We believe China is also becoming more investable, with its push to develop a self-sufficient health care system leading to a burgeoning homegrown biotechnology industry while it largest conglomerates are making progress in generative AI infrastructure while gaining share in domestic consumer markets. 

We believe China is also becoming more investable, with its push to develop a self-sufficient health care system leading to a burgeoning homegrown biotechnology industry. The world’s second-largest economy has the necessary institutional commitment to R&D and life sciences infrastructure to become a profitable global competitor to Western biopharmaceutical companies. We are actively looking at the key players in this rapidly developing market.