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U.S. Shutdown


The Clearbridge View.




We expect that Congress, at a minimum, will work out a short-term solution over the coming weeks. As political parties continue to talk behind the scenes it should be noted that investors are more concerned with the extension of the U.S. Government debt ceiling, set to expire on October 17th. Relative to the debt ceiling showdown in 2011, the stock market, economic growth and business fundamentals are all stronger.

While we always take into consideration economics, politics and global events, our focus today is on preparing for the upcoming wave of third quarter earnings reports. Consensus S&P 500 (1) expectations are for a sales increase of approximately 1% and a 10% bottom line
earnings advance. Over the last few quarters, sales have continued to miss expectations, earnings have been sufficient and forward guidance from company managements has determined the post earnings reaction of stocks.

The U.S. stock market has had a magnificent rise since 2009. Despite sluggish job growth and a tempered rebound in overall GDP, corporate earnings have increased materially as profit margins expanded from depressed levels. Further, stock valuations have risen to more
traditional levels as risks have receded. Balance sheets flush with cash and continued strong cash generation have allowed companies to be more aggressive in terms of returning capital to shareholders. While the risk/return profile for the overall market appears more balanced going forward, ClearBridge remains positive about the long-term health of the U.S. economy and stock market and we view any pullback related to the current government shutdown as temporary.

By Scott Glasser
Co-Chief Investment Officer, Portfolio Manager ClearBridge Investments

Will the U.S. Government Shutdown Create Opportunity for Long-Term Fundamental Investors?
October 1, 2013 — Like most investors, ClearBridge is frustrated by the lack of action in Washington. For the eighteenth time since 1976, the inability of the U.S. Congress to pass a budget and fund government operations has resulted in the shutdown of non-essential government operations. Shutdowns have ranged in duration from one to 21 days. In the short term, we believe a government shutdown would have minimal economic impact. An ongoing impasse lasting a couple of weeks, however, would begin to reduce fourth quarter GDP. (2)

Past performance is no guarantee of future results.
All investments involve risk, including possible loss of principal.

(1) The S&P 500 Index is an unmanaged index of 500 stocks that is generally representative of the performance of larger companies in the U.S. An investor cannot invest directly in an index. Unmanaged index returns do not reflect any fees, expenses or sales charges.

(2) Gross Domestic Product (“GDP”) is an economic statistic which measures the market value of all final goods and services produced within a country in a given period of time.

This material is not for public distribution outside the United States of America.
Please refer to the disclosure information on the final page.

Investment risks
All investments involve risk, including possible loss of principal. Past performance is no guarantee of future results. An investor cannot invest directly in an index. Unmanaged index returns do not reflect any fees, expenses or sales charges.
Common stocks generally provide an opportunity for more capital appreciation than fixed-income investments but are subject to greater market fluctuations. Dividends and yields
represent past performance, and there is no assurance they will continue to be paid in the future.
The views expressed are those of the portfolio manager as of October 1, 2013 and are subject to change based on market and other conditions. These views may differ from other portfolio managers or the firm as a whole, and are not intended to be a forecast of future events, a guarantee of future results or investment advice.

© 2013 Legg Mason Investor Services, LLC, member FINRA, SIPC. ClearBridge Advisors, LLC and Legg Mason Investor Services, LLC, are Legg Mason, Inc. subsidiaries.
409836 MIPX015940 10/13 FN1313338

Lundi 7 Octobre 2013
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