Global Growth Strategy Commentary July

Market Overview

Global equities saw mixed results in July as a progress on trade deals with the U.S. was tempered by profit taking in some regions after a strong stretch to end the second quarter. North America, emerging markets and Asia Ex Japan outperformed the 3.17% return in local currency of the benchmark MSCI All Country World Index. The United Kingdom posted solid returns but trailed the benchmark while Japan and Europe Ex U.K. were the worst performers for the month.

Led by continued momentum in U.S. large caps, growth stocks outperformed their value counterparts with the MSCI ACWI Growth Index rising 3.93% in compared to a return of 2.34% for the MSCI ACWI Value Index.

In the U.S., which represents the largest weight in the benchmark and the Strategy, stocks rose on strong corporate earnings, easing trade tensions and economic resilience despite higher tariffs. The S&P 500 Index continued to set new record highs, reflecting investor confidence in growth and technology sectors. Passage of the One Big Beautiful Bill Act, softer than expected inflation in June and preliminary trade deals for the U.S. with both the EU and Japan were positive drivers, helping temper concerns about tariffs and Federal Reserve independence. The U.S. economy grew at a brisk 3% in the second quarter after contracting 0.5% in the first quarter, although much of the growth was due to declining imports after businesses front-loaded purchases in the first quarter to get ahead of tariffs. The latest readings on jobs and manufacturing came in weaker than expected while inflation picked up, leaving the Federal Reserve in a wait and see mode on future rate cuts. Amidst these mixed signals, U.S. Treasury yields rose 15 bps to finish July at 4.38%.

Portfolio Highlights

The ClearBridge Global Growth Strategy outperformed the benchmark in July with stock selection in the U.S. and Europe Ex U.K. the primary contributors.

From a sector standpoint, stock selection in communication services, health care and information technology (IT) contributed to results. Within communication services, Roblox maintained its momentum with quarterly results that topped estimates with indications that the U.S.-based online game and game development platform is early in its beat and raise growth cycle. Health care saw a handsome rebound, led by Dutch biotech Argenx, which rose on better-than-expected sales of its key treatment Vyvgart, and U.S. life science tools maker Thermo Fisher Scientific, which delivered a beat and raise second quarter on indications of a recovery in tools demand. The Strategy also saw strong contributions from Italian electrical equipment maker Prysmian, U.S. chip maker Nvidia, and Canadian supply chain technology provider Celestica.

On the negative side, stock selection in the consumer discretionary sector was the primary detractor from relative performance. Shares of Latin America e-commerce platform MercadoLibre were lower on profit taking after a strong first half of the year and souring sentiment after the company did not raise its forward earnings estimates. U.S. online pet retailer Chewy, meanwhile, continued to slump after a disappointing profit report in June. Shares of Check Point Software fell sharply despite posting strong quarterly results as investors feared Palo Alto Networks acquisition of a rival would impact demand for Check Point’s cyber security software.

We initiated six positions in July: Spain-based global lender Banco Santander, U.S. cloud infrastructure software maker Oracle, U.S. electronic design automation software provider Synopsys, Celestica, Chinese jewellery maker Laopu Gold and Swiss eyecare device maker Alcon. The Strategy also closed three positions: U.S. document software provider DocuSign, U.S. social media platform Reddit and Spanish bank BBVA.

Outlook

In addition to a resilient U.S. equity market that is showing some signs of broadening past mega caps, 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 and greater clarity on tariffs 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. 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.