WrapManager's Wealth Management Blog
When life changes, we can help you thoughtfully respond.

Clearbridge Investments - Multi Cap Growth Q2

Posted by WrapManager's Investment Policy Committee
August 4, 2015

ClearBridge_InvestmentsClearbridge's Richard Freeman and Evan Bauman, provide their perspective on the second quarter discussing views on market volatility, focus sectors, and interest rates.  

"Market overview and outlook

U.S. stocks traded in a tight range during the second quarter, with the major indexes ending largely unchanged. The large cap S&P 500 Index gained 0.28% for the quarter, the small cap Russell 2000 Index added 0.42%, while the broad market Russell 3000 Index gained 0.14%.

Volatility remained low as investors awaited a clear signal from the Federal Reserve on when it will commence raising short-term interest rates. The S&P 500 sustained its longest stretch without a 2% daily move up or down since 2007. That more than six-month stint was snapped on June 29 when the index fell 2.09% following the breakdown of talks between Greece and its creditors. The sharp drop – the largest for the S&P 500 since April 2014 – pared gains for most equity benchmarks.

As with stocks, the U.S. economy continued its slow march forward through the second quarter. Employment continued to lead the way, with payrolls increasing by an average of 221,000 per month, and the unemployment rate declining to 5.3%, its lowest level since April 2008. Final revisions to first-quarter GDP showed that the economy contracted by 0.2%, an improvement over an earlier reading, which suggested that the winter slowdown in growth could be temporary. Consumer spending and new and existing home sales showed healthy improvement in May, while consumer confidence bounced back late in the quarter. Offsetting those gains were disappointing reports on industrial production.
The mixed economic picture combined with continued strength in the U.S. dollar caused the Federal Reserve to maintain its cautious stance on rates. Fed Chair Janet Yellen asserted in June that the committee still needs to see further improvement in labor markets, wages and inflation before tightening monetary policy.

Given uncertainty in other parts of the global economy, we believe owning U.S.-centric companies is the best approach in the current environment. The portfolio’s media holdings were among the best performers for the quarter due to business models and attractive programming assets that have less sensitivity to global demand drivers. Our health care positions also continued to perform due to leading market positions, innovative therapies and strong balance sheets that make them less susceptible to cyclical factors. 

As we have mentioned in previous commentaries, our preference for quality companies at compelling valuation levels and with long-term organic growth opportunities is shared by activist investors and corporate acquirers. Over time, this has led a number of our portfolio holdings to become the target of takeovers. Industry consolidation had a beneficial impact during the quarter on Broadcom, in the information technology sector, and Pall Corp., in the industrials sector. In addition, activists announced stakes in portfolio holdings in the technology and industrials sectors. Our media holdings also benefited from the increased likelihood of consolidation following the failure of the Comcast/Time Warner Cable merger. Health care stocks continue to enjoy a tailwind from M&A activity, and we expect to see similarly accretive deals occur in the energy sector as larger players take advantage of lower commodity prices to reposition their businesses." To review the full report and charts, please download below.

Learn more about ClearBridge Investments and other Money Managers! Call us at 1-800-541-7774 or contact us here to speak with one of our Wealth Managers. 

pdficon Download ClearBridge's Full Commentary Here

icon_report Request FREE Research Reports from ClearBridge Investments

Money Manager Research ClearBridge Investments LLC