Insights

Jeff Schulze, Head of Economic and Market Strategy at ClearBridge Investments, discusses key spending, employment and other policy factors he is following as we look forward to 2026.

ClearBridge Investments believes positive forces from One Big Beautiful Bill Act passage and future interest rate cuts should soon outweigh negative forces of tariff actions.

ClearBridge Investments: The economy and markets are entering uncharted waters and policy uncertainty appears likely to remain elevated in the near term. This only further underscores the benefits of diversification for equity investors.

ClearBridge Investments: The 10 largest companies in the S&P 500 Index present an opportunity for active managers who tend to do better when the average stock is outperforming.

ClearBridge Investments: While it may be tempting to think the US is due for mean reversion, investors will likely have to wait a little longer, given our expectation that the fundamental drivers of US exceptionalism will remain in place in 2025.

ClearBridge Investments is bullish on the US economy and US equity market, expecting an upside surprise to GDP growth in 2025 and broadening earnings participation among stocks.

ClearBridge Investments: A healthier US economy, the start of a rate cutting cycle and aggressive Chinese stimulus all improve the chances of a soft landing.

ClearBridge Investments: US value and US small cap stocks outperform on rate cut optimism.

ClearBridge Investments suggests adopting a longer-term perspective can lead to a different conclusion about the health of a slowing economy.

ClearBridge Investments believes improving credit spreads are consistent with diminished risks and rising equity valuations, which is an encouraging development for long-term investors.

While the recent uptick in inflation fears may take time to abate, ClearBridge Investments believes the improved outlook combined with the recent pullback in U.S. equities represents an opportunity for long-term investors.

ClearBridge Investments: The distinct nature of the current cycle has foiled traditional recession indicators while markets may be in a unique valuation regime.

Clearbridge Investments: With economic data continuing to surprise to the upside and a series of rolling sector recessions appearing to have failed to coalesce into a broader downturn, the Recession Risk Dashboard overall signal has improved to yellow from red.

Clearbridge Investments: The equity outlook remains mixed as a soft landing is unlikely to be accompanied by substantially lower interest rates, suggesting the upside from multiple expansion could be limited.

ClearBridge Investments: Improving recession indicators and a flexible Fed have increased our optimism about a potential soft landing.

Clearbridge Investments: With the market and FOMC suggesting the rate hike cycle is complete, the first interest rate cut could come by May 2024, a pause consistent with the Fed’s “higher for longer” messaging.

ClearBridge Investments: Despite a surprisingly good GDP in the last quarter, we remain cautious as consumption has historically remained strong right up until or even past the start of previous recessions.

ClearBridge Investments: The toughest test for investors lies ahead as stimulus and consumer resilience fade while lagged effects of rate hikes take hold.

ClearBridge Investments believe the 10-year U.S. Treasury yield is likely to stabilize and decline in the coming year, supporting equity market valuations and influencing leadership.

ClearBridge Investments: Despite improving economic sentiment now leaning the consensus view toward a soft landing, we continue to believe a recession is on the horizon.

ClearBridge Investments believes high-quality upstream oil and LNG-linked equities offer disciplined exposure in a market where geopolitical risk now drives oil pricing.

ClearBridge Investments: Rising energy-related inflation risks underscore the importance of UK energy security and the attractiveness of regulated infrastructure businesses with revenues linked to their regulated asset bases.

ClearBridge Investments believes the outlook for infrastructure in 2026 remains robust, driven by the accelerating demand for power and data fueled by AI.

ClearBridge Investments believes accelerating policy-driven investment and AI-driven data center growth are unlocking a multi-decade growth opportunity for listed utilities globally.

ClearBridge Investments: Despite recent strong performance for listed infrastructure versus equities, infrastructure valuations are still attractive on a risk adjusted basis, and could have room to run.

ClearBridge Investments: A new regime of tariffs will likely create the need for more infrastructure to support reshoring, while utilities' lack of exposure to international trade may bolster their defensiveness.

ClearBridge Investments: Demand for renewable energy will continue to be strong regardless of policy changes due to factors such as AI, as we think the market overlooks the changing electricity demand for renewable energy.

ClearBridge Investments believes the drivers of strong performance for midstream energy infrastructure in 2024 look to be just as relevant for 2025 and beyond.

ClearBridge Investments: While Donald Trump’s presidential victory has dominated global headlines, several key election results outside the United States could have significant impacts on international markets going forward in 2025.

ClearBridge Investments: Opportunities continue to be widespread across the infrastructure landscape, with strong fundamentals and the market still massively underestimating the growth in electricity demand driven by AI and data growth.

The potential of AI and data growth to drive significant infrastructure investment represents an emerging long-term thematic driver for the listed infrastructure asset class, according to ClearBridge Investments.

While the emergence of generative AI has sparked debate and uncertainty, ClearBridge Investments believes long-term investors should focus on the fundamental value proposition of software in driving business efficiency and innovation.

ClearBridge Investments believes reshoring and improving efficiencies leaves high-quality less-than-truckload (LTL) companies and rail stocks attractively positioned for a macro rebound.

According to research from ClearBridge Investments, infrastructure has historically outperformed global equities over several time periods after the last rate hike.

ClearBridge Investments believes regulated utilities are entering into an elevated capex cycle over the coming decades, and regulators are broadening their allowed returns to help utilities finance that growth.

ClearBridge Investments: While public funding for renewables may face increasing policy risk, regulators will continue to provide attractive returns for regulated utilities supporting the energy transition.

ClearBridge Investments: The accelerating pace of power demands among AI aspirants is underappreciated and will involve a rising pull on already stretched energy resources.

ClearBridge Investments: Infrastructure’s inflation pass-through worked well in 2023, supporting earnings, while its defense and diversification could make it valuable in 2024.

Despite challenging global economic and market conditions, there are compelling opportunities within global listed infrastructure, according to Shane Hurst, Portfolio Manager with ClearBridge Investments. He explores how the trends of decarbonization, reshoring and 5G evolution are impacting the space, and how the nature of listed infrastructure can offer some insulation against high inflation.

ClearBridge Investments: Infrastructure’s defensiveness and ability to provide long-term capital growth make it stand out in an environment of macroeconomic uncertainty and higher bond yields.

ClearBridge Investments believes high-quality upstream oil and LNG-linked equities offer disciplined exposure in a market where geopolitical risk now drives oil pricing.

ClearBridge Investments believes significant state-supported investment in research and development, combined with established life science infrastructure, is bolstering the rapid growth of a Chinese biotechnology industry.

ClearBridge Investments believes massive fiscal reforms in Europe and resolution of the Russia-Ukraine war could help close the leadership gap between the United States and the rest of the world.

ClearBridge Investments believes the drivers of strong performance for midstream energy infrastructure in 2024 look to be just as relevant for 2025 and beyond.

ClearBridge Investments: Our expectation is that 2025 will be a more modest but positive year given ample liquidity, healthy corporate profits and animal spirits that have been buoyed by expectations of a pro-growth, deregulatory agenda.

ClearBridge Investments: India’s long‑term growth opportunity is underpinned by favorable demographics, rising domestic consumption and corporate reforms.

ClearBridge Investments believes emerging market equities have turned a corner, showing strong performance after years of lagging returns.

ClearBridge Investments believes emerging market equities have turned a corner, showing strong performance after years of lagging returns.