Global Balanced Portfolio Positioning Intra-Quarter Update as of 06/15/2018

Shifted Consumer Staples to an overweight within the U.S. equity allocation and modestly reduced U.S. Health Care overweight

We have reallocated within the Global Balanced strategy’s less economically-sensitive U.S. equity sector exposure, reflecting the evolution of the economic backdrop and opportunities created by recent market action. We increased our exposure to the Consumer Staples Sector and, to fund this increase, we reduced exposure to the Health Care Sector, our largest U.S. sector overweight. We have also taken this opportunity to rebalance portfolios.

Given the progress made thus far in the economic cycle, we believe maintaining exposure to less economically-sensitive U.S. sectors is warranted, and a shift in market conditions presented an opportunity to move back to an overweight in Consumer Staples. In January of 2017, we had reduced exposure to the U.S. Consumer Staples Sector to increase the economic sensitivity of the portfolio and reduce risks from rising interest rates. Since then, the U.S. Consumer Staples Sector has underperformed the broad U.S. market by more than 20 percentage points, and prior risks we saw for the Consumer Staples Sector have eased. Valuations for the Consumer Staples Sector have declined materially, and sentiment now seems overly negative toward the sector. U.S. interest rates have also risen, reducing a key risk to Staples. As investors refocus on fundamentals in the current environment of moderate economic growth, the Consumer Staples Sector offers stable earnings growth potential which should support positive relative returns.

Meanwhile, the U.S. Health Care Sector has provided strong absolute performance over the past year-and-a-half, roughly in line with the broad market, and it has materially outperformed in recent weeks following the announcement of the Trump administration’s Blueprint to Lower Drug Prices, which reduced some investor uncertainty toward the sector. We continue to have a very positive view toward Health Care, and it remains our largest U.S. sector overweight.

Overall, these allocation adjustments represented an opportunity to take advantage of recent market shifts, increase U.S. Consumer Staples to an overweight, and keep portfolios aligned with the economic backdrop without changing our aggregate target exposure to less economically-sensitive U.S. sectors in our equity allocation.

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.