- Recent economic data indicates a modest pickup in U.S. GDP growth, but we do not expect dynamic growth to be sustained given the progress already made in the economic cycle.
- U.S. sectors with attractive growth and stability of earnings should outperform going forward, while the most economically-cyclical sectors face risks to meeting elevated earnings expectations.
- Economic growth is decelerating abroad amid ongoing structural challenges in Europe as well as risks to emerging markets from protectionism and U.S. dollar strength.
- Upward pressure on interest rates should continue from the Fed’s measured short-term rate hikes, the recent rebound in inflation, and potential normalization of longer-term real interest rates.
- U.S. Consumer Staples and Health Care overweights provide attractively valued earnings stability in this extended expansion.
- Avoidance of U.S. Energy, Materials, and Industrials limits portfolio reliance on dynamic economic acceleration.
- Underweights to international markets reflect our expectation for economic deceleration abroad and a rising U.S. dollar.
- Emphasis of short-duration fixed income securities and avoidance of U.S. Utilities and Real Estate equities limit interest rate risk.
• Short-Duration Fixed Income
• Emerging Asia Equities
• U.S. Industrials Equities
• U.S. Energy Equities
• North America ex-U.S. Equities
• U.S. Treasury Securities