Uncertainty about the future of global trade has certainly been evident in financial markets this year — and the highly fluid and unpredictable nature of the current environment will likely keep investors on edge until the outlook clears.


Of course, no one knows for certain whether more tariffs and greater protectionism will define the future, or whether present efforts to renegotiate the terms of major trade relationships will eventually give way to freer and more fair trade. But Legg Mason bond managers Brandywine Global and Western Asset are on the watch, closely monitoring how developments on the trade front could impact their macro outlook, as well as prospects for individual issuers and industries.


The Latest Perspectives

Robert Abad of Western Asset offers in-depth analysis that includes:

A review of the last major trade war initiated by passage of the Smoot-Hawley Tariff.

A look at the primary trade relationships and industries most likely susceptible to disruption.

An analysis of the 16 top global credit sectors – created with input from Western Asset's global investment team on the 'front lines' – that ranks their respective degrees of trade vulnerability.

Gary Herbert of Brandywine Global provides analysis and outlook based on global trade volumes.

While tariffs and non-trade barriers can and will impact trade volumes and prices, we believe volumes will only be modestly impacted by the current tensions.

Despite the protectionist political rhetoric, we anticipate there will be freer and more fair trade in the coming years.

Yet that doesn’t preclude some short-term pain from capital markets as the details of trade agreements are sorted out.


Investment Process Summary 


Western Asset

We believe we can identify and capitalize on markets and securities that are priced below fundamental fair value. We do this through disciplined and rigorous analysis, comparing prices to the fundamental fair values estimated by our macroeconomic and credit research teams around the globe. The greater the difference between our view of fair value and markets’ pricing, the bigger the potential value opportunity. The greater the degree of confidence in our view of fundamentals, the greater the emphasis of the strategies in our portfolios. We seek to diversify investments and add value across interest rate duration, yield curve, sector allocation, security selection, and country and currency strategies. We deploy multiple diversified strategies that benefit in different environments so no one strategy dominates performance, helping to dampen volatility.

Brandywine Global

Our approach is to seek undervalued assets globally by utilizing a top-down macroeconomic framework and a value-driven process. Real yield is our primary measure of value in the global bond market. We also actively manage our currency exposures and focus on owning undervalued currencies with the potential for appreciation. We hedge currencies that we believe are overvalued or pose downside risk. We structure our portfolios along macroeconomic themes involving business cycle analysis, inflation trends, monetary policies and political risk. We typically concentrate investments in the 10 to 15 countries that we find most attractive.

IMPORTANT INFORMATION: All investments involve risk, including loss of principal. Past performance is no guarantee of future results. Please see each product’s web page for specific details regarding investment objective, risks, performance and other important information. Review this information carefully before you make any investment decision.

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Forecasts are inherently limited and should not be relied upon as indicators of actual or future performance.

The opinions and views expressed herein are not intended to be relied upon as a prediction or forecast of actual future events or performance, or a guarantee of future results, or investment advice.