Added to U.S. Financials equity sector exposure and trimmed U.S. Health Care equity sector exposure

We have added to our U.S. Financials equity sector allocation in the Global Balanced portfolio, offset by a reduction in our U.S. Health Care equity sector overweight.  This swap increased the Financials Sector target allocation from 5% to 10% of the portfolio’s U.S. large-cap equity allocation, and reduced the Health Care Sector target allocation from 35% to 30% of the portfolio’s U.S. large-cap equity allocation.

The increase in U.S. Financials Sector exposure reflects, in part, our outlook for continued moderate economic growth and interest rate normalization, as well as increased confidence that financial regulatory reform will be a priority for the Trump administration.  Given our outlook for an extended period of moderate economic growth, we thought it was appropriate to modestly increase the economic sensitivity of the portfolio by adding to Financials and reducing Health Care slightly.

We believe that both Financials and Health Care will deliver strong relative earnings growth in the economic environment we see ahead, but, on the margin, we see increasing tailwinds for U.S. Financials given our confidence in financial regulatory reform.   We also maintain a positive view on the U.S. Health Care sector, but given the sector’s strong performance YTD (second-best performing U.S. sector) and our desire to further increase our Financials Sector allocation, we believed Health Care was an appropriate source of funds for the portfolio shift.  We also recognize that there remains uncertainty about the regulatory environment for the Health Care Sector, as illustrated by the recent failure to repeal and replace the Affordable Care Act.  Despite this uncertainty, companies in the Health Care Sector continue to be attractively valued given their earnings growth potential, and thus the Health Care Sector remains our largest U.S. sector overweight.

The most recent complete presentation can be viewed here.
Any portfolio characteristics, including position sizes and sector allocations among others, are generally averages and are for illustrative purposes only and do not reflect the investments of an actual portfolio unless otherwise noted. The investment guidelines of an actual portfolio may permit or restrict investments that are materially different in size, nature and risk from those shown. The investment processes, research processes or risk processes shown herein are for informational purposes to demonstrate an overview of the process. Such processes may differ by product, client mandate or market conditions. Portfolios that are concentrated in a specific sector or industry may be subject to a higher degree of market risk than a portfolio whose investments are more diversified.
Holdings, Sector Weightings and Portfolio Characteristics were current as of the date specified in this presentation. The listing of particular securities should not be considered a recommendation to purchase or sell these securities. While these securities were among WestEnd Advisors’ Global Balanced holdings at the time this material was assembled, holdings will change over time. There can be no assurance that the securities remain in the portfolio or that other securities have not been purchased. It should not be assumed that recommendations made in the future will be profitable or will equal the performance of the securities presently in the portfolio. Individual clients’ portfolios may vary.