Global Growth Strategy January Commentary

Market Overview

Global equities were on the upswing in January, overlooking negative sentiment around Donald Trump’s initial slew of political moves in the White House intended to protect U.S. interests. Europe in particular rebounded from a negative performance in the fourth quarter. The benchmark MSCI All Country World Index advanced 2.59% for the month in local currency, with Europe Ex U.K. and the United Kingdom outperforming, North America and Asia Ex Japan slightly underperforming while Japan and emerging markets were the main laggards.

Growth stocks underperformed their value counterparts with the MSCI ACWI Growth Index rising 2.59% in USD compared to a gain of 4.20% for the MSCI ACWI Value Index.

In the U.S., which represents the largest weight in the benchmark and the Strategy, equities moved higher in January, overcoming escalating U.S. trade-related uncertainty, a more hawkish path for interest rates and a shock from the unveiling of DeepSeek, a Chinese generative AI model. The S&P 500 Index climbed 2.79% for the month in USD as leadership broadened toward more cyclical names and sectors. Despite solid corporate earnings and economic data, the Trump inauguration spurred waves of market uncertainty following a flurry of executive orders, which included new tariff announcements against Canada and Mexico late in the month. The tariffs, which could be delayed or softened before taking effect, sparked fears of an increase in inflation that could potentially derail future interest rate cuts. The unveiling of DeepSeek, with reportedly lower development costs and less need for computing power of comparable AI tools, drove a selloff in the information technology (IT) sector. The U.S. added 256k jobs in December, the most in nine months, while inflation readings ticked up, with the Consumer Price Index rising for the third consecutive month, from 2.7% in November to 2.9%. Ten-year Treasury yields ended a volatile month 4 basis points lower at 4.54%.

Portfolio Highlights

The ClearBridge Global Growth Strategy outperformed the benchmark in January with stock selection in North America and emerging markets and an overweight to Europe Ex U.K. the primary contributors.

From a sector standpoint, stock selection in communication services and consumer discretionary and an overweight to communication services drove performance. Within communication services, U.S. mega cap Meta Platforms saw its shares rise on strong results that were highlighted by AI-driven advertising share gains, making it one of the leaders in showing monetisation from AI. Shares of U.S. social media platform Reddit, Singapore-based e-commerce and gaming provider Sea Limited and Luxembourg music streaming service Spotify all extended their positive momentum into the new year. Other leading contributors included U.S. mega cap e-commerce and cloud provider Amazon.com in consumer discretionary and U.S. alternative asset manager KKR in financials. 

On the negative side, stock selection in the health care sector was the primary detractor from relative performance. Within health care, Japanese medical device maker Terumo and Swiss biotech MoonLake Immunotherapeutics posted the largest losses. The most significant individual detractors were Hong Kong IT hardware maker Lenovo and financials holdings HDFC Bank from India as well as insurers Tokio Marine from Japan and Chubb from the U.S. 

We initiated six new positions in January while exiting two others. The largest additions were JPMorgan Chase, U.S.-based HVAC supplier Trane Technologies, Italian electrical and power components manufacturer Prysmian, Dutch electronic payments provider Adyen and Japan’s Mitsubishi UFJ Financial Group. The Fund sold out of Japanese electronic equipment maker Keyence and Swedish alternative asset manager EQT.

Outlook

Despite Trump’s initial pro-U.S. policy actions, which along with the DeepSeek fallout, supported a broadening of the U.S. market, we see several triggers that could close the performance gap for regions outside the U.S. in the year ahead: settlement of the war in Ukraine, which saw the Trump administration restart the negotiation process in early February,  would pave the way for a massive Marshall Plan style rebuilding of the country’s infrastructure; increased stimulus from Germany and Japan, two countries that are behind the rest of the developed world in providing support to their economies; and a greater investor appreciation for the much more attractive valuations of international equities.

We are encouraged by the improving conditions across our investable universe as they create a more conducive environment for our diversified approach to growth. Recent performance has highlighted the benefits of complementing core secular growth positions with opportunistic ownership of structural growers and selective exposure to emerging growth names.