Amazon, Apple and Microsoft are among the most notable shifts toward value, while Nvidia and Alphabet remain concentrated in growth.

“The rebalance will also drive meaningful sector and industry changes, most notably among semiconductor stocks, with elevated turnover across portfolios,” Elisa Mazen, ClearBridge portfolio manager says.

“As a result of these changes, trading activity within strategies tied to these two large cap indexes is expected to be higher than normal.”

Much of the market’s attention has focused on the Magnificent Seven, where the benchmark shifts are substantial, particularly for Amazon.com. Based on preliminary projections1 through the end of May, these bellwether mega caps will see their collective weighting decline ~11.6 percentage points in the Russell 1000 Growth Index (RLG) while simultaneously gaining ~ 10.7 percentage points in the Russell 1000 Value Index (RLV).

These reclassifications will immediately impact active strategies’ weightings relative to their growth and value benchmarks.

Sector-level changes based on preliminary May 29 pricing are also expected to be meaningful. Within the RLG, overall information technology (IT) exposure changes modestly, but on the subsector level semiconductors will increase to 35.9%, led by the additions of KLA Corp. which will become the third-largest stock in the index and Micron Technology, while the software subsector will decline by 5.5%.

Additionally, communication services will increase by 3.6%, while consumer discretionary will decline by 4.9%.

Within the RLV, consumer discretionary will increase by 4.4% and IT by 2.2%, while communication services will decline by 4.6%.

Industrials and IT are expected to experience the largest net outflows as a result of the rebalance.

Mazen adds, “Turnover will likely increase in the near term as large cap portfolios adjust to the new index compositions, but this is not unique to ClearBridge. These dynamics are expected to affect both active and passive managers broadly across both growth and value mandates.”

The post While markets watch SpaceX, a Russell rebalance rewrites the rulebook for both active and passive managers appeared first on AdviserVoice.

Jeffrey Schulze

Corporate capex is supporting economic growth in the US, according to Jeff Schulze, head of economic and market strategy at ClearBridge Investments.

Artificial intelligence (AI) investment in data centers requires related power, cooling, networking, semiconductor and software infrastructure, which now accounts for ~1% of GDP.

“Capex is not just limited to AI, however, with several other metrics showing green shoots. These include the ISM Manufacturing PMI survey, which has held above 50 in each of the past five months, along with inflections in industrial production and core capital goods (non-defense, ex-aircraft) orders and shipments. This pickup in capex is a positive sign and is likely being helped at the margin by the corporate tax incentives from the One Big Beautiful Bill (OBBB).

“With consumers and companies continuing to forge ahead, we remain optimistic that markets can continue to rally over the medium term. Endemic to that view is the fact that the market’s upside over the past year has come on the back of improving fundamentals with multiples de-rating modestly. Put differently, equities have climbed higher on the back of stronger earnings, an encouraging foundation for a continuation of the bull market.

“History shows that investors should not be scared off by the market’s recent strength, even though the S&P 500’s surge in April and May ranks among the top 10 strongest two-month stretches since 1950. While several similarly sharp rallies have occurred around recessions, many others were rooted firmly within economic expansions, including 1997, 1998, 2019 and 2025.

“When focusing on non-recessionary periods specifically, history shows that stocks have continued to advance following similar surges, with average returns of 5.3% and 8.5% over the subsequent three and six months, respectively.

“Although bouts of volatility are likely, robust corporate earnings should continue to provide a solid market foundation, making us inclined to continue to “buy the dips” should pullbacks emerge.”

The post Corporate capex provides solid footing for US equities appeared first on AdviserVoice.

Jeffrey Schulze

As investors digest implications of a higher US consumer price index reading and a historic summit between US President Donald Trump and Chinese President Xi Jinping, ClearBridge Investments says investors needn’t shy away from new highs, particularly when earnings expectations are holding up.

“We are staying disciplined, using volatility as an opportunity to deploy capital, while modestly favouring the stronger earnings revisions and more reasonable valuations available in non-U.S. equities,” Jeff Schulze, head of economic and market strategy at ClearBridge Investments, says.

“The rebound in US equities from late-March lows has been swift and broad-based, with equities rising 13.6 per cent since their trough. April alone accounted for 10.4 per cent of the gain, making it the best monthly performance since 2020 and the 12th best monthly return in more than 75 years.

“A key reason we continue to believe US markets can climb higher is the green overall signal emanating from the ClearBridge US Recession Dashboard,” Schulze says.

The dashboard, which tracks a range of economic indicators, has now returned a fully green reading after Housing Permits, previously delayed by government shutdown data disruptions, stabilised and flipped from yellow to green.

The bullish signal comes against a complex macro backdrop. Wednesday’s CPI print showed US inflation running at 3.2 per cent annually, above consensus forecasts, reinforcing expectations that the Federal Reserve will keep rates on hold through mid-year. Separately, the first face-to-face meeting between President Trump and President Xi since 2023 has raised hopes of a de-escalation in trade tensions, though markets remain cautious.

Schulze says, “The US labor market has alternated between positive and negative prints for the past 11 months, with net job creation modestly positive on balance. More broadly, the labor market has cooled over the past few years primarily due to drags from changes in immigration policy and the aging population demographics. It still does not appear that artificial intelligence (AI) is driving widespread layoffs, although there are pockets of softer hiring.

“We are encouraged by initial jobless claims – our economic canary in the coalmine – notching its lowest total since 1969 last week alongside other recent signs of labor market stabilization. Looking ahead, we remain on watch for AI-driven job losses, but we are also eyeing AI job creation as previously unimaginable jobs emerge on the back of this technological advancement.”

The geopolitical risk has not disappeared.

“The equity rally does appear to be vulnerable to a re-escalation of the conflict in the Middle East, particularly if disruption to trade in the Strait of Hormuz lasts longer than is currently expected (reopening around mid-year). Given that the bulk of the April rally occurred in conjunction with the de-escalation of tensions in the Middle East, we believe the risk of a prolonged supply bottleneck is real.

“We continue to believe that the economic impacts should remain manageable and not result in a meaningful economic slowdown: further pullbacks would likely represent buying opportunities, in our view. At the same time, we do not believe investors should be scared off by the markets being back at all-time highs.

“Our work (counterintuitively) shows that investing at new highs has historically outperformed deploying capital when the benchmark is below peak.

The S&P 500 is trading back above 20 times on a forward price-to-earnings basis, a level some investors treat as a ceiling.

“But the benchmark has traded above that multiple 63 per cent of the time since first crossing the threshold in April 2020, without acting as a headwind to returns. Over the past six years the index has risen 147.5 per cent, roughly double the long-run average, underpinned by cumulative next-12-month earnings growth of 137 per cent.”

“First-quarter results, now past the two-thirds mark by market capitalisation, have delivered strong upside surprises, with information technology, energy and materials sectors showing notable strength. Consensus expectations for mid-teens earnings growth have continued to rise rather than follow the typical seasonal pattern of downward revision.”

“We continue to believe non-U.S. equities present an attractive opportunity relative to domestic US stocks. Emerging markets (EM) look particularly compelling despite their recent strength, with robust revisions to earnings expectations powering their returns and supporting a continued constructive fundamental outlook.

“Valuations also remain less challenging than in the U.S., and although some EM economies are significant oil importers, the adage that the stock market is not the economy rings even more true in the case of many EM countries.

“Developed non-U.S. equities should also benefit from positive earnings revisions and attractive valuations, although to a lesser degree.”

The post ClearBridge sees non-U.S. equities as an attractive opportunity appeared first on AdviserVoice.

Jeffrey Schulze

Strong market entry points are rarely found during moments of comfort or clarity. Instead, the most attractive buying opportunities are typically associated with periods of market stress. From there, equities tend to climb a “wall of worry,” advancing in the face of issues such as recessions, inflation spikes, geopolitical tensions, policy errors and lofty valuations, according to ClearBridge Investments.

“This dynamic exists because what matters most for financial markets is if reality turns out better or worse than what has already been priced in. As a result, when expectations are low—as they are today—stocks can push higher if subsequent events turn out better than feared. From this perspective, scepticism is not a barrier to a bull market but rather part of its foundation. Doubts will eventually be assuaged and sentiment will improve, which should lead to hedges being unwound and cash moving off the sidelines,” says Jeff Schulze, head of market and economic strategy at ClearBridge Investments.

At present, the biggest “bricks” in the wall of worry include stagflation, private credit risks, job losses due to artificial intelligence (AI) and market concentration.

“The first is directly related to oil prices. How long these stay higher appears to be the most significant worry for investors at present. While current conditions invite comparisons to the 1970s, the US economy is structurally different today—with energy independence achieved and energy intensity lower—suggesting the transmission from higher oil prices into growth and inflation should be more muted than the past.”

The most recent oil shock in 2022, sparked by the Russian invasion of Ukraine, did not drive a US recession as the aforementioned structural changes were already in place.

“The second brick in the wall of worry has been private credit. The opaque nature of the asset class has led some to conclude that it is ripe to be the next shadow-banking accident. However, deeper analysis shows that while risks certainly exist, they are unlikely to generate substantial enough macroeconomic spillovers to cause a recession.”

At its core, private credit uses long-term funding that is gated, which limits the risk of a problematic “run on the bank” dynamic where investors all look to exit at once. Use of leverage in the asset class is moderate, with IMF research suggesting that aggregate bank exposure to the industry amounts to $300 billion, or less than 2% of overall loan books. Although private credit has witnessed an uptick in defaults recently, its overall size amounts to a fraction of what mortgage-backed securities (MBS) were heading into the Global Financial Crisis (GFC). Private credit today is equivalent to 6% of gross domestic product (GDP); MBS in 2007 was approximately 30%.

The third brick in the wall of worry has been fear of an AI-induced layoff cycle or “job apocalypse.”

“This fear is understandable. If AI displaces workers faster than it creates new jobs, overall household income would fall, demand would weaken and corporate profits would deteriorate. Although February’s soft jobs report supported this recessionary narrative, a closer examination of the data suggests that other factors are playing a larger role than AI in slowing the pace of US job creation. These include changes in immigration and trade policy, alongside the continued aging of the US population and DOGE-related efforts to shrink the federal workforce,” he notes.

“One overlooked component of the debate around an AI-induced layoff cycle, in our view, is the fact that throughout history, major technological advances have led to job creation alongside job destruction. This creative destruction process means that significant value and jobs are created by new businesses, offsetting some of the losses from the disruption of legacy firms,” he adds.

“Already, AI has created jobs building infrastructure (such as data centers), and we believe these opportunities will broaden in the years to come. The pace of job creation relative to destruction will be crucial in determining the path of the labor market and by extension the US economy, but history shows that the overall effect is usually a positive one. Only 40% of today’s jobs existed 85 years ago, suggesting investors and workers alike should embrace the opportunities presented by AI.

“Similar fears regarding a “job apocalypse” were present during the late 1990s internet revolution. However, the economy benefited as new occupations were created in areas that were previously unimaginable, such as e-commerce, video games and content creators—yes, “influencers.”

“History shows that when we look back on 2026 in a decade or two, the likelihood is high that a substantial number of jobs will exist in areas we can’t even dream of today, built on the back of advances made possible by AI. Put differently, creative destruction is a feature rather than a bug of technological change and a positive force for economic growth. In fact, this very idea was awarded the Nobel Prize in economics last year.”

The fourth and final brick is elevated US equity market concentration. The 10 largest companies in the S&P 500 currently account for 38% of the benchmark and trade at a 5.4x multiple-point premium based on expected next-12-month earnings. Given this backdrop, passive large cap benchmarking no longer offers a broadly diversified and balanced portfolio, but rather an increasingly concentrated exposure to the most richly valued part of the index.

Admittedly, it is hard to imagine a world where today’s largest companies are not dominant forces over the next decade. However, a myriad of factors may alter the earnings trajectory of the current leaders as AI matures and the competitive landscape changes. The aftermath of the tech bubble may serve as a good case study, particularly as it coincides with the last period of elevated S&P 500 concentration.

The prospects of the 10 largest S&P 500 constituents at the peak of the tech bubble (March 2000) have varied widely over the subsequent 26 years. Four have had negative price returns, and only three have outperformed the benchmark. Notably, none of the 10 have outpaced the equal-weight S&P 500. While the current environment is certainly different than the dot-com era, this case study is a helpful reminder of the dynamic that may play out in the coming years. Importantly, it also illustrates the opportunity for active managers that can accurately assess the changing competitive landscape and embedded valuations of today’s leaders.

“With multiple bricks making up the wall of worry today, investors can be tempted to treat each unsettling headline as the tipping point for the next crisis. Comparisons abound between higher oil and stagflation in the 1970s, and between current private credit risks and MBS ahead of the GFC, for example. However, many of these issues are more nuanced than is typically understood.

“We conclude that these worries are likely forming the foundation for a renewed rally as fears subside, a typical feature of bull markets. Given our constructive economic and market outlook, we believe the market will ultimately climb today’s wall of worry as investors’ leading fears are assuaged. As a result, we view the current pullback as an opportunity to deploy capital for long-term investors,” notes Schulze.

The post Market will ultimately climb today’s wall of worry appeared first on AdviserVoice.

Jeffrey Schulze

Escalating tensions in the Middle East have once again rattled global markets with oil markets at the centre of investor concern. The possibility that Iran could disrupt the Strait of Hormuz, a critical chokepoint through which roughly 20%–30% of global seaborne energy trade passe, has driven a sharp move in energy prices.

“While geopolitical shocks often create short-term turbulence, history suggests that investors should resist the urge to retreat. In fact, periods of geopolitical stress have frequently created buying opportunities,” Jeffery Schulze, Head of Economic and Market Strategy, ClearBridge Investments says.

“Looking at past geopolitical flare-ups, the S&P 500 Index has, on average, delivered positive returns over the one, three and six-month periods following such events.

“Even during larger conflicts that escalated into full-scale wars, the record is mixed rather than uniformly negative. In many cases, broader macroeconomic conditions ultimately proved more influential than geopolitical developments.

“Some of the weakest market outcomes following military escalations occurred during periods when the US economy was already entering recession — including 1973, 1979 and 1990. These episodes suggest that economic cycles, rather than geopolitical events themselves, tend to be the primary drivers of sustained market weakness.”

He adds “But for financial markets today, the most important transmission mechanism from the Middle East conflict to the global economy is oil. Higher oil prices historically acted as a significant drag on US growth. However, the structure of the US economy has changed considerably in recent decades.”

The United States is now a net producer of energy rather than a net consumer. As a result, rising oil prices create a more balanced economic effect. “While higher fuel costs can dampen consumer spending, increased energy production can also support employment, investment and corporate profits within the domestic energy sector,” says Schulze.

“Another structural shift further reduces the economic impact of rising energy prices: American households now spend a much smaller share of their budgets on energy than they did historically.

“Today, direct spending on energy goods and services accounts for less than 4% of US consumption. That is well below the nearly 5% share seen in early 2022 when Russia invaded Ukraine, and even further below the levels recorded ahead of the Gulf War in 1990 and the Iraq War in 2003.”

This decline reflects decades of efficiency improvements, including higher fuel economy standards, as well as rising overall household income. As a result, increases in energy prices tend to exert less pressure on consumer finances than in previous geopolitical crises.

While rising energy prices could temporarily lift headline inflation, the Federal Reserve is unlikely to react aggressively.

Oil price spikes are generally viewed as supply shocks, something monetary policy is less effective at addressing. During previous energy-driven inflation episodes, including those following pandemic supply disruptions, the Fed has tended to focus more heavily on underlying inflation trends.

In particular, policymakers closely monitor “core” inflation measures such as core Personal Consumption Expenditures (PCE), which exclude volatile commodity prices like oil. These measures are likely to show a much smaller impact from energy price movements.

“Given this dynamic, we continue to expect the Federal Reserve to begin cutting interest rates in the second half of the year.

“Despite recent volatility, the broader economic outlook remains constructive. While the events in the Middle East have introduced some uncertainty, they have only modestly altered our economic expectations heading into 2026.

“History suggests that geopolitical shocks rarely derail markets for long. More often, they create temporary dislocations that long-term investors can use to their advantage. For investors willing to look beyond short-term headlines, the evidence remains clear: buying geopolitical dips has historically been a rewarding strategy,” he notes.

 By Jeff Schulze, Head of Economic and Market Strategy

The post Buy the dip? History suggests geopolitical shocks can create opportunity appeared first on AdviserVoice.

Reece Birtles

Australian equities delivered a strong performance in 2025, with the S&P/ASX 200 rising more than 10%^[1]), supported by a falling interest rate environment and easing inflation pressures. Market leadership was defined by a rotation toward higher-beta exposures, while expensive growth stocks lagged, reflecting shifting macro conditions and changing investor preferences.

According to ClearBridge Investments’ head of Australian equities, Reece Birtles, the year marked an important inflection point for value-style investing, even as valuation dispersion across the market remains historically wide.

“We are still early in the process of value reasserting itself. The disconnect between share prices and fundamental valuation remains wide, but the market is starting to show classic signs that the momentum phase, and crowded, index-dominated growth names are losing their shine.

“Importantly, value-style stocks continue to be a low-beta, a lower-risk expression, providing fundamental earnings resilience in the current environment. Just as we saw during the Tech Bubble, in periods of exuberance rather than crisis, value provides downside protection precisely when euphoria unwinds.

“Despite this, many investors remain heavily skewed toward growth exposures, leaving their portfolios vulnerable if the full rotation toward value accelerates,” he notes.

Australia’s earnings outlook has also strengthened materially, particularly relative to offshore markets. He highlights a sharp turnaround in earnings per share (EPS) expectations following the August 2025 reporting season.

“We’ve seen significant upgrades to expected EPS growth, moving closer to double-digit territory,” Birtles says. “That has been concentrated in resources, driven by iron ore at the index level, but also supported by copper, gold, lithium and rare earths. We expect to see stronger commodity prices improve Australia’s terms of trade and drive nominal GDP growth. That’s a great predictor for the revenue, earnings and dividend growth of Australian companies more broadly.”

Importantly, Australian consumer confidence and business condition surveys are now showing stronger readings than their US counterparts.

“On a relative basis, Australia had been a laggard globally for EPS growth, but heading into 2026, it’s starting to look materially stronger.”

The widening valuation dispersion has created a fertile environment for active managers focused on quality and risk discipline, Birtles notes.

“Alpha and risk come from two things – stock selection and style risk. Given the extreme valuation spread within quality companies, this has been a very rich stock-picking environment for our style of investing.”

Among the holdings that have contributed positively across ClearBridge portfolios are ANZ Banking Group, Lynas Rare Earths, BHP Group, Ventia Services Group and Downer EDI.

The firm also sees continued opportunity in specialist income portfolios, driven by attractive valuations and accelerating dividend growth.

“We expect income portfolios to deliver compelling yields this year, with expected franked income and growth well above the broader market. The companies we invest in are attractively valued, yet they are growing earnings and dividends faster than the market. In contrast, many expensive technology names and passive darlings are offering little, if any, earnings or dividend growth,” Birtles says.

 ———

Notes:
[1] S&P Global, ‘S&P/ASX 200 Fact Sheet’, Calendar-year 2025 return.

The post Earnings momentum signals a new phase for Australian equities appeared first on AdviserVoice.

EM equities tend to benefit from a stable or depreciating US dollar, making current conditions favorable for the asset class. This is a function of lower US-denominated debt servicing costs, commodity exporter tailwinds and increased monetary policy flexibility facilitating falling interest rates and supporting economic growth. Additionally, this environment comes hand-in-hand with improved investor sentiment, fostering a virtuous cycle as increased foreign capital flows into the regions further enhance potential investment performance,” says Andrew Mathewson, Portfolio Manager at ClearBridge Investments.

Investing in emerging markets offers exposure to many countries offering economic growth rates, which have generally been faster than most developed nations. “Additionally, EM provides exposure to three long-term structural trends. The Chinese economy is in the early stages of a policy pivot from a focus on deleveraging toward one that targets growth. This creates company-level investment opportunities and encourages more global investor flows to return to China. The launch of China’s DeepSeek chatbot sent shockwaves around the world, highlighting Chinese advancement and shifting assumptions about the cost and scale needed for cutting-edge AI. In addition to China, several other EM countries are key developers of components critical for AI development, offering significant investment opportunities.

“India could offer great upside potential, in our view, as it remains the fastest-growing major global economy, benefiting from a large and young population. Indian valuations have seen a correction back to long-term levels, reinforcing the importance of active management to gain exposure to company-level opportunities,” notes Mathewson.

More broadly, EM equities provide exposure to companies benefiting from accelerated technological adoption, demographic shifts such as urbanisation and the expansion of the middle class and financial inclusion.

“These businesses have world-class innovation capabilities across an array of sectors, all of which benefit from substantial investment in research and development and intellectual property creation. We believe these fundamental trends establish a robust foundation for ongoing economic development and corporate earnings growth in emerging markets.”

In addition to offering potential return upside, EM allocations offer potential diversification benefits that can reduce overall portfolio risk.
“EM stocks often have different economic cycles and sector exposures compared to developed markets, providing investors the potential for less correlated returns and better risk-adjusted performance. Such diversification can be particularly useful in periods when other asset classes struggle. For example, emerging markets have tended to outperform the US market during periods of low US returns.”

Specifically, in the rolling 10-year periods since 1971 when the S&P 500 Index has returned less than 6% annualized, the MSCI Emerging Markets Index has outperformed US equities every time while delivering an annualized return of 12.1%.

———–

* Data as of September 30, 2025. Sources: Morningstar, S&P, MSCI.

The post Long term structural drivers lift investment in emerging market equities appeared first on AdviserVoice.

Jeffrey Schulze

The U.S. federal government shutdown has halted most economic data releases over the past month. While the timing is suboptimal given the cooling U.S. labor market, this does not mean that investors are “flying blind,” as many alternative private sector data sources are available, according to ClearBridge Investments.

“Although these datasets often have narrower scope or less depth, we monitor them even when the federal government is open for business to help supplement our understanding of the U.S. economy. At present, we are heavily focused on these alternative data sources, given the disruption to the flow of government data,” notes Jeff Schulze, Head of Economic and Market Strategy ClearBridge Investments.

Fortunately, seven of the 12 indicators on the ClearBridge Recession Risk Dashboard come from sources not impacted by the shutdown and that continue to be updated. None of these seven indicators experienced a signal change in October.

For the other five, many alternative private sector data sources enable us to monitor current conditions.

“We are evaluating alternative sources for the five ClearBridge Recession Risk Dashboard indicators impacted by the shutdown: Housing Permits, Jobless Claims, Retail Sales, Wage Growth and Profit Margins. Our analysis suggests a continuation of recent trends for each and a continued overall green signal for the dashboard.

“With profits and margins continuing to expand, we believe the probability of a pickup in layoffs tipping the economy into a recession remains low. Instead, we remain confident that economic growth will continue to moderate but stay on a healthy trajectory,” says Schulze.

The ClearBridge Recession Risk Dashboard was created in January 2016. References to the signals it would have sent in the years prior to January 2016 are based on how the underlying data was reflected in the component indicators at the time.

Four of the five indicators impacted by the government shutdown focus on the U.S. consumer, which is unfortunate given the outsize role consumption plays in the U.S. economy.

“However, the silver lining is that, given this importance, an abundance of additional data sources can be utilised to gauge the health of the consumer.

“To monitor future housing activity, we evaluate publicly available datasets such as the Dodge Construction Network’s residential building starts, which rose by 3.6% in the latest release. While the dashboard focuses on permits as opposed to starts, the two concepts are closely related.

“We complement this data with survey data from the National Association of Home Builders (NAHB) as measured by the NAHB/Wells Fargo Housing Market Index, which saw an uptick in sentiment, suggesting construction activity could pick up into 2026. The positive tone from these two datasets is tempered by weekly purchase applications from the Mortgage Bankers Association, which fell in October.”

Combined, the near-term picture for housing is mixed, consistent with the latest available yellow signal for Housing Permits.

The second dashboard indicator on hold has a more direct substitute. Jobless Claims are normally reported by individual states and then aggregated and adjusted by the U.S. Department of Labor. Because the states themselves are not impacted by the federal government shutdown, the underlying jobless claims data still exists — it just needs to be compiled.

Several Wall Street banks, research boutiques and economic think tanks have been doing this during the shutdown, and their work clearly shows that the trend in jobless claims has remained steady over the past month. This means the indicator likely remains green.

“We take comfort from the fact that Fed Chairman Jerome Powell expressed a similar view that “available evidence suggests that both layoffs and hiring remain low” during last week’s Federal Reserve Open Market Committee (FOMC) press conference.”

Retail Sales also has a straightforward proxy: the Chicago Fed Advance Retail Trade Summary (CARTS). CARTS is a nowcasting tool similar to the Atlanta Fed’s GDPNow tracker, but for retail sales.

The CARTS estimate for the latest data is that retail sales ex-autos advanced by +0.3% sequentially and +0.2% when adjusted for inflation. These readings would be consistent with a continued green signal for Retail Sales, as well as other alternative data sources focused on consumer spending, including Johnson Redbook’s same-store sales and credit card spending data, both of which suggest consumer spending continues to grow.

Wage Growth is the final consumer indicator impacted by the shutdown.

Data from ADP and Indeed.com both point toward wage gains continuing at their recent pace in the latest available data. Further, steady wage trends are consistent with Powell’s comments during the FOMC press conference that U.S. labor market trends have not meaningfully shifted since the shutdown began.

The fifth and final dashboard indicator impacted by the shutdown is Profit Margins, which comes from the National Income and Product Accounts data, a subcomponent of the quarterly GDP release.

As a proxy, we evaluate a narrower slice of corporate profits by aggregating earnings releases from public companies. Public companies that have reported so far continued to see margin expansion during the most recent quarter and sell-side analyst expectations are that on balance this will be the case overall (including unreported companies).

In all, combining the seven indicators that can be updated with the best available proxies for the other five, we believe the overall dashboard remains firmly in green territory. With profits and margins continuing to expand, we believe the probability of a pickup in layoffs tipping the economy into a recession remains low. State-level initial jobless claims data further suggests that this dynamic is not playing out at present.

“Combining this with other key economic trends remaining intact — even in the absence of official data — bolsters our confidence that economic growth continues to moderate but remains on a healthy trajectory,” adds Schulze.

The post Alternative private sector data points to a growing US economy despite lack of economic data releases from the US government appeared first on AdviserVoice.

As the AI revolution matures, the most compelling opportunities may not lie in who builds the next ChatGPT, but in who powers it

Three years after the launch of ChatGPT, generative artificial intelligence (Gen AI) has become one of the most transformative forces in global technology markets. According to Hilary Frisch, Portfolio Manager at ClearBridge Investments, the expansion of Gen AI across both consumer and enterprise sectors has triggered a powerful investment cycle, particularly for companies that build the infrastructure underpinning this technological revolution.

“We’re still in the early innings of a once-in-a-decade capital expenditure cycle,” said Frisch. “Cloud hyperscalers continue to dominate AI investment, but the real opportunity for investors lies in the ‘picks and shovels’ industries that enable large language models to run at scale.”

Cloud leaders Microsoft, Amazon, Alphabet and Meta Platforms are projected to spend a combined US$378 billion in 2025- a 65% increase from 2024 – as they expand their data centre and AI capabilities. Frisch noted that this surge in spending, funded largely through internal cash flows rather than debt, “demonstrates confidence in AI as a long-term evolution in computing, not a speculative trend.”

Emerging players such as Oracle, CoreWeave, and several privately held cloud providers are also committing billions to AI infrastructure, adding further momentum to the capex supercycle.

Frisch noted the critical role of cloud infrastructure and data software companies in enabling AI workloads. As enterprises move from experimental in-house AI systems to proven, scalable platforms, demand for sophisticated infrastructure software is surging.

Oracle, for example, has transformed into a formidable fourth hyperscaler. Its Oracle Cloud Infrastructure powers major AI initiatives such as the U.S. government’s Stargate AI project and partnerships with OpenAI, xAI, and Meta. “Oracle’s evolution shows how tailored infrastructure built for AI workloads can open new growth avenues,” said Frisch.

Meanwhile, data warehousing firms like Snowflake and Databricks are thriving as companies look to unify siloed data for AI training and analytics. “Quality data is the fuel for large language models,” Frisch explained. “These platforms are increasingly indispensable to the AI ecosystem.”

Frisch also pointed to growth in monitoring and observability software, a niche sector helping enterprises manage complex technology stacks. Firms such as Datadog and Dynatrace are poised to benefit as organisations scale up AI workloads and demand deeper visibility into performance and security.

The unprecedented compute demands of Gen AI are reshaping the semiconductor landscape. “Inference models like ChatGPT require specialised chips that traditional processors simply can’t handle,” said Frisch. “This has sparked a renaissance in custom silicon development.”

While Nvidia remains the dominant player in AI GPUs, companies such as Broadcom, Marvell Technology, and ARM Holdings are carving out lucrative niches by designing application-specific integrated circuits (ASICs) tailored for hyperscaler needs.

“Broadcom’s partnerships with Google, Meta, and OpenAI highlight a smart strategy—collaborating rather than competing with the hyperscalers,” Frisch noted. “We expect AI chip revenues to accelerate significantly as these data centres scale.”

Frisch added that networking and connectivity solutions like Marvell’s high-speed ethernet switches and optical interconnects are becoming just as critical as processing power. “The next bottleneck in AI computing isn’t the chip but how fast data can move between them,” she said.

Despite the hype, Frisch believes the Gen AI boom is only beginning. “We’re witnessing a secular growth trend across infrastructure software and semiconductors,” she said. “As hyperscalers sustain record-level capex, companies building the AI backbone- those that make the systems run- are positioned for durable earnings and cash flow growth.”

“In short, as the AI revolution matures, the most compelling opportunities may not lie in who builds the next ChatGPT, but in who powers it.”

The post Gen AI buildouts continue to spur tech infrastructure boom appeared first on AdviserVoice.

Felicity Walsh

Franklin Templeton has completed the global integration of Martin Currie’s investment capabilities into ClearBridge Investments. This marks a significant milestone in Franklin Templeton’s business strategy in Australia, reinforcing its commitment to local investors and to Australian based investment capabilities.

This strategic alignment brings together two highly complementary businesses in terms of culture and investment approach and will see Australian Equities and Emerging Markets strategies added to ClearBridge’s existing global equity and infrastructure offering.

Franklin Templeton will now oversee the distribution of the full suite of ClearBridge strategies to institutional and wholesale clients across Australia and New Zealand.

Felicity Walsh, Franklin Templeton’s Managing Director for Australia and New Zealand, emphasised the significance of this integration: “Franklin Templeton’s completion of the Martin Currie integration is a crucial step in our commitment to the Australian market. Bringing together these highly complementary businesses under ClearBridge Investments strengthens our ability to deliver tailored solutions across all segments of the Australian market”.

For the Martin Currie team, being part of ClearBridge Investments means leveraging additional resources and scale, including research capabilities- and expanded trading capabilities. The integration also aligns with their shared commitment to sustainability and ESG analysis.

Scott Glasser, Chief Investment Officer at ClearBridge, highlighted the complementary strengths of the combined investment offering. “We are excited to bring these strategies under the ClearBridge umbrella while remaining true to the investment philosophy that has driven their success. ClearBridge and Martin Currie are highly aligned in investment approach and culture, making this a natural evolution,” Glasser said.

Reece Birtles, now Head of Australian Equities at ClearBridge Investments, reiterated that the quality and integrity of their Australian equity strategies remain unchanged.

“Our clients can be confident that our Australian equity strategies will continue to be managed with the same disciplined process, deep fundamental research and active management approach that have delivered strong outcomes over many years,” Birtles said. “Under the ClearBridge brand, we remain committed to offering a comprehensive suite of capabilities that help our clients achieve their long-term investment objectives.”

Walsh further highlighted the benefits of the integration for Australian investors: “In a rapidly evolving industry, the need for scale, stability and innovation is critical. This integration demonstrates our commitment to Australian investors and our mission to partner with them for long-term success.”

The post Franklin Templeton completes Martin Currie integration with ClearBridge, further strengthening Australian market presence appeared first on AdviserVoice.