{"id":57825,"date":"2026-04-08T06:04:31","date_gmt":"2026-04-08T06:04:31","guid":{"rendered":"https:\/\/prosfunds.com\/?p=57825"},"modified":"2026-04-08T06:04:34","modified_gmt":"2026-04-08T06:04:34","slug":"clearbridge-investments-q1-2026-commentary","status":"publish","type":"post","link":"https:\/\/prosfunds.com\/?p=57825","title":{"rendered":"ClearBridge Investments Q1 2026 Commentary"},"content":{"rendered":"
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\u201cBull markets climb a wall of worry; bear markets slide down a river of hope.\u201d <\/em>– Wall Street adage<\/p>\n<\/blockquote>\n

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 \u201cwall of worry,\u201d advancing in the face of issues such as recessions, inflation spikes, geopolitical tensions, policy errors and lofty valuations.<\/p>\n

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 \u2014 as they are today \u2014 stocks can push higher if subsequent events turn out better than feared. From this perspective, skepticism 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.<\/p>\n

At present, the biggest \u201cbricks\u201d 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 U.S. economy is structurally different today \u2014 with energy independence achieved and energy intensity lower \u2014 suggesting the transmission from higher oil prices into growth and inflation should be more muted than the past.<\/p>\n

A good example of this can be found in direct spending on energy goods and services by U.S. consumers, which had fallen below 4% of consumption before the escalation of geopolitical tensions in the Middle East. This figure is nearly the lowest since World War II and well below the months heading into both the Iraq War in 2003 and the Gulf War in 1990.<\/p>\n

Exhibit 1: Don’t Be So “Energy” Sensitive<\/strong><\/p>\n

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Sources: U.S. Bureau of Economic Analysis (BEA), NBER, Macrobond. Data as of March 13, 2026, latest available as of March 31, 2026. Gray shading reflects recessionary periods.<\/span><\/p>\n<\/figcaption><\/figure>\n<\/p>\n

The most recent oil shock in 2022, sparked by the Russian invasion of Ukraine, did not drive a U.S. recession as the aforementioned structural changes were already in place. Additionally, the ClearBridge Recession Dashboard has shown itself to be an important barometer for the fate of the economy heading into shocks, with the green overall signal in February 2022 suggesting the U.S. could weather the storm. This has, in fact, been the case during seven of the eight most recent major energy spikes occurring amid an overall expansionary reading on the dashboard. Conversely, oil shocks that occurred when the dashboard was red \u2014 suggesting the economy was already vulnerable to a recession \u2014 have served as a catalyst or added fuel to an already burning economic fire.<\/p>\n

Exhibit 2: Dashboard Determines Economy’s Fate<\/strong><\/p>\n

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Note: Oil price is Arabian Gulf Arab Light prior to April 1993, and West Texas Intermediate from April 1993 \u2013 present. Oil \u201cspikes\u201d occurring in the aftermath of recessions are excluded. Data as of March 31, 2026. Oil price sources: Bloomberg, Federal Reserve Bank of St. Louis, Economic Research Division, NYMEX. Recession Dashboard Sources: BLS, Federal Reserve, Census Bureau, ISM, BEA, American Chemistry Council, American Trucking Association, Conference Board, Bloomberg, S&P, NBER. The ClearBridge Recession 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.<\/span><\/p>\n<\/figcaption><\/figure>\n<\/p>\n

The dashboard\u2019s continued overall green expansionary signal gives us additional comfort that, although sentiment is poor, underlying economic fundamentals are holding up. This should offer resilience to the current oil shock. There were no individual indicator changes for the dashboard this month, and we welcome the \u201creturn\u201d of the Retail Sales indicator, which is no longer \u201con hold\u201d after being disrupted by the government shutdowns and has maintained its pre-shutdown green reading. We are optimistic that Housing Permits data will \u201ccatch up\u201d from shutdown disruptions next month given the current Census Bureau release schedule (Exhibit 3).<\/p>\n

The combination of weak sentiment, a market selloff and resilient economic fundamentals suggests a buying opportunity for long-term investors. History shows that investors should consider taking advantage of this weakness, with solid returns in the S&P 500 Index following historical \u201cgeopolitical dips.\u201d Specifically, U.S. equities have experienced positive returns on average over the 1-, 3-, and 6-month periods following past geopolitical flare-ups dating back to 1950. We note that some of the poorest returns in the track record have come during larger conflicts that escalated into major wars, but even there the record is mixed, with economic fundamentals tending to supersede geopolitical risks for equity markets such as during the recessions in 1973 and 1990 (Exhibit 4).<\/p>\n

Exhibit 3: U.S. Recession Dashboard<\/strong><\/strong><\/p>\n

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\u2018Not Available\u2019 reflects data that has not been updated due to the government shutdown. Data as of March 31, 2026. Sources: BLS, Federal Reserve, Census Bureau, ISM, BEA, American Chemistry Council, American Trucking Association, Conference Board, Bloomberg, CME Group, FactSet and Macrobond. The ClearBridge Recession 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.<\/span><\/p>\n<\/figcaption><\/figure>\n<\/p>\n

Exhibit 4: Buy the Geopolitical Dip?<\/strong><\/p>\n

\n<\/span><\/p>\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n
<\/th>\n <\/th>\nS&P 500 Price Return (%)<\/th>\n <\/td>\n <\/td>\n<\/tr>\n<\/thead>\n
Geopolitical Event<\/strong><\/td>\nDate <\/strong><\/td>\n 1 Month <\/strong><\/td>\n 3 Months <\/strong><\/td>\n 6 Months<\/strong><\/td>\n<\/tr>\n
Korean War<\/td>\nJune 1950<\/td>\n-10.0%<\/td>\n1.5%<\/td>\n4.9%<\/td>\n<\/tr>\n
Vietnam War starts<\/td>\nNov. 1955<\/td>\n7.3%<\/td>\n4.1%<\/td>\n13.9%<\/td>\n<\/tr>\n
Suez Crisis<\/td>\nOct. 1956<\/td>\n-4.4%<\/td>\n-3.6%<\/td>\n-1.4%<\/td>\n<\/tr>\n
1958 Lebanon Crisis<\/td>\nJuly 1958<\/td>\n5.3%<\/td>\n12.1%<\/td>\n23.8%<\/td>\n<\/tr>\n
Cuban Missile Crisis<\/td>\nOct. 1962<\/td>\n5.4%<\/td>\n13.3%<\/td>\n21.1%<\/td>\n<\/tr>\n
Indo-Pakistani War<\/td>\nAug. 1965<\/td>\n2.6%<\/td>\n7.7%<\/td>\n8.7%<\/td>\n<\/tr>\n
Six-Day War<\/td>\nJune 1967<\/td>\n3.3%<\/td>\n6.5%<\/td>\n7.7%<\/td>\n<\/tr>\n
Arab-Israeli War<\/td>\nOct. 1973<\/td>\n-4.5%<\/td>\n-10.0%<\/td>\n-15.3%<\/td>\n<\/tr>\n
Fall\/Liberation of Saigon<\/td>\nApril 1975<\/td>\n4.4%<\/td>\n1.8%<\/td>\n2.3%<\/td>\n<\/tr>\n
Iran Hostage Crisis<\/td>\nNov. 1979<\/td>\n4.2%<\/td>\n11.6%<\/td>\n3.0%<\/td>\n<\/tr>\n
Soviet-Afghan War<\/td>\nDec. 1979<\/td>\n5.4%<\/td>\n-8.0%<\/td>\n6.7%<\/td>\n<\/tr>\n
Iran-Iraq War<\/td>\nSept. 1980<\/td>\n1.2%<\/td>\n4.1%<\/td>\n2.8%<\/td>\n<\/tr>\n
Multinational Force in Lebanon<\/td>\nAug. 1982<\/td>\n4.9%<\/td>\n13.9%<\/td>\n27.4%<\/td>\n<\/tr>\n
1986 U.S. Bombing of Libya<\/td>\nApril 1986<\/td>\n-1.4%<\/td>\n-1.7%<\/td>\n0.5%<\/td>\n<\/tr>\n
U.S. Invasion of Panama<\/td>\nDec. 1989<\/td>\n-1.1%<\/td>\n-0.4%<\/td>\n4.7%<\/td>\n<\/tr>\n
Gulf War<\/td>\nAug. 1990<\/td>\n-8.2%<\/td>\n-11.3%<\/td>\n-2.4%<\/td>\n<\/tr>\n
Croatian War<\/td>\nMarch 1991<\/td>\n1.4%<\/td>\n0.7%<\/td>\n3.7%<\/td>\n<\/tr>\n
Bosnian War<\/td>\nApril 1992<\/td>\n2.8%<\/td>\n2.0%<\/td>\n0.4%<\/td>\n<\/tr>\n
Kosovo War<\/td>\nFeb. 1998<\/td>\n4.4%<\/td>\n4.6%<\/td>\n-2.1%<\/td>\n<\/tr>\n
War in Afghanistan<\/td>\nOct. 2001<\/td>\n4.1%<\/td>\n8.7%<\/td>\n4.8%<\/td>\n<\/tr>\n
Iraq War<\/td>\nMarch 2003<\/td>\n2.0%<\/td>\n13.7%<\/td>\n18.3%<\/td>\n<\/tr>\n
Russian Invasion of Ukraine<\/td>\nFeb. 2022<\/td>\n2.6%<\/td>\n-10.3%<\/td>\n-2.8%<\/td>\n<\/tr>\n
Iran Conflict<\/td>\nFeb. 2026<\/td>\n-7.4%<\/td>\n???<\/td>\n???<\/td>\n<\/tr>\n
Average<\/strong><\/td>\n1.1%<\/strong><\/td>\n2.9%<\/strong><\/td>\n6.0%<\/strong><\/td>\n<\/tr>\n<\/table>\n

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