Global Balanced Portfolio Outlook, Positioning, and Attribution as of 6/30/2018

Outlook

  • 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.

Portfolio Positioning

  • 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.

Q2 Attribution

Positive Contributors:

Overweight
• Short-Duration Fixed Income

Underweight
• Emerging Asia Equities
• U.S. Industrials Equities

Negative Contributors:

Underweight
• U.S. Energy Equities
• North America ex-U.S. Equities
• U.S. Treasury Securities

Attribution Analysis is relative to the Global Balanced benchmark and was current as of the date specified in this presentation. A complete attribution report is available upon request. 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. Upon request, WestEnd Advisors will provide a list of all recommendations for the prior year.