Franklin Templeton: Defensive growth, or just defense?

ClearBridge believes there is room to run for infrastructure in 2022 as the cost of capital has been in a steady decline over the last decade.

Nick Langley, Portfolio Manager at ClearBridge Investments, shares his outlook for the global infrastructure sector in 2022. 

Key Takeaways

1. In an uncertain macroeconomic environment, the certainty of future earnings and growth will be key: infrastructure and utilities significantly outperform other equities on this measure.
2. Given our base case of slowing growth and higher inflation, our playbook for infrastructure portfolios broadly is to watch for a transition from a growth orientation to a more defensive positioning as growth fades and utility underperformance unwinds.
3. Generally, user-pays infrastructure and utility returns are positively correlated to inflation, but results differ by sector and region; meanwhile, climate inflation looms and is underappreciated at present.

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