According to ClearBridge Investments, a broader market is finding footing. Broadening earnings strength and improving economic signals support a constructive outlook for stocks, with earnings likely to remain the key driver of market leadership in the second half of the year. Below is a summary of the most recent Recession Indicators report:
Key Takeaways: According to Jeff Schulze, CFA, Head of Economics & Market Strategy with ClearBridge Investments:
~ Earnings and market leadership are continuing to broaden out to a larger group of companies; ClearBridge Investments believes a focus on earnings should be part of any stock investor’s playbook when trying to ascertain market leadership in the coming months.
~ Corporate commentary from key industrial bellwethers suggests a broader capex cycle is finally underway, a view confirmed by key datapoints such as ISM New Orders and the ClearBridge U.S. Recession Dashboard broadly, which maintains its overall green signal this month and had no changes.
~ Although the market may still be undergoing a period of digestion following the second quarter’s strong gains, ClearBridge Investments believes the path of least resistance for stocks is higher in the second half of the year with earnings continuing to power the way.
U.S. Recession Dashboard
Source: ClearBridge Investments
If you step back from the day-to-day headlines, the stock market has been relatively calm lately—and in investing, “boring” can often be a good thing.
The S&P 500 Index reached its 27th all-time closing high of 2026 on August 13th. The following trading day, the CBOE Volatility Index (VIX), a widely followed measure of expected stock market volatility, closed at 14.25—its lowest level since early January.
While low volatility does not mean market risk has disappeared, the combination of new market highs and subdued volatility provides some useful perspective on the current environment.
Volatility Has Remained Subdued
One of the clearest indications of the market's recent calm is the VIX. After spending much of July between 17 and 19 amid changing tariff and interest-rate expectations, volatility declined during early August and recently reached levels not seen since January.
For perspective, the VIX has averaged approximately 19.6 since 1990. Its recent reading near 14 is therefore meaningfully below its long-term average.
Our technical indicators have also continued to reflect declining volatility. The VIX has remained in a negative trend since March and currently sits on consecutive sell signals. Even during recent periods when stocks have declined, volatility has remained relatively contained.
This is consistent with another trend we have been monitoring throughout 2026: the percentage of trading days during which the S&P 500 moves 1% or more has generally remained below its historical average. Rather than experiencing large swings in either direction, the market has generally advanced in a more measured fashion.
Source: Nasdaq Dorsey Wright
Putting All-Time Highs in Perspective
The S&P 500's 27 record closing highs so far this year may sound extraordinary, but new highs are a normal characteristic of rising markets.
Since 1950, the S&P 500 has averaged approximately 18 all-time highs per year. That average, however, includes extended periods following major bear markets when the index did not establish any new records.
Looking at the more recent period beginning in 2013, the S&P 500 has averaged just over 33 new all-time closing highs annually. There can be considerable variation from year to year. For example, 2021 produced 70 new highs, while 2024 produced 57. By comparison, 2022 and 2023 combined produced only one.
The important takeaway is that new market highs tend to occur in clusters during sustained bull markets. An all-time high, by itself, does not necessarily indicate that the market has become overvalued or is due for an immediate decline.
Source: Nasdaq Dorsey Wright
What History Tells Us About New Highs and Low Volatility
Perhaps more interesting is what has historically occurred when the S&P 500 reaches an all-time high while volatility is relatively low.
Since 1990, there have been hundreds of trading days when the S&P 500 closed at a record high. After filtering the data to avoid counting multiple highs occurring within the same two-week period, there were 101 distinct observations.
More than half of those instances occurred when the VIX was below 15. Historically, subsequent S&P 500 performance following those periods has generally been favorable, particularly as the investment horizon lengthened. Among the 54 observations when the VIX was below 15, the S&P 500 was higher six months later approximately 80% of the time.
Of course, historical averages are not guarantees of future results, and periods of low volatility can change quickly. Nevertheless, the historical data provide useful context: record highs accompanied by relatively low volatility have not, on their own, been reliable indications that a market decline is imminent.
Source: Nasdaq Dorsey Wright
What It Means for Investors
Today's combination of relatively low volatility, continued market highs, and a generally constructive trend does not necessarily suggest an overheated market. Instead, the current environment supports maintaining perspective and remaining disciplined rather than reacting to individual headlines or assuming that new highs automatically signal trouble ahead.
We will continue monitoring volatility, market breadth, relative strength, and other indicators for evidence that conditions are changing. For now, the broader market trend remains constructive, and history provides a useful reminder that periods of relative calm and new highs can persist longer than investors sometimes expect.
As always, short-term market movements are unpredictable, and past performance does not guarantee future results. Maintaining an investment strategy aligned with your individual goals, time horizon, and tolerance for risk remains more important than attempting to anticipate the market's next short-term move.
The current reading for the PR4050 is: U.S. Equity Core = 99.30% & Money Market = 6.34%. For the PR4050 indicator to trigger and alert us when we should consider moving to cash, U.S. Equity Core must be 40% or below and Money Market must be 50% or above.
Source: Nasdaq Dorsey Wright
Below is the most recent D.A.L.I. (Dynamic Asset Level Investing) Indicator showing International Equities and Domestic Equities in the top two spots, while both maintain a commanding lead over Cash and Fixed Income.
Source: Nasdaq Dorsey Wright
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These views are those of the author, not of the broker-dealer or its affiliates. This material contains an assessment of the market and economic environment at a specific point in time and is not intended to be a forecast of future events, or a guarantee of future results. All investments involve risk, including loss of principal. Forward-looking statements are subject to certain risks and uncertainties. Actual results, performance, or achievements may differ materially from those expressed or implied. Information is based on data gathered from what we believe are reliable sources. All indices are unmanaged and may not be invested into directly.
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Nasdaq Dorsey Wright’s “DALI" employs relative strength-based analysis to rank macro asset classes based on developing leadership trends within the global capital markets. The objective guidance within DALI provides the tools necessary to properly allocate portfolios across all major asset classes in an effort to emphasize strength wherever it exists. Domestic Equities, International Equities, Commodities, Currencies, Fixed Income and Cash are evaluated daily to identify dynamic developments across investment genres, as well as within them. This tool provides the tactical precision that allows investors to adapt as the market leadership changes.
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MSCI World Index: A broad global equity index that represents large and mid-cap equity performance across 23 developed markets countries.
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