- The global economic outlook remains positive, bolstered by a trend of moderate economic growth in the U.S., where Q3 data reaffirmed that the U.S. consumer remains healthy.
- European data this year has pointed to softer economic activity.
- Japan’s personal income and business CapEx have improved and Asian equity valuations have declined markedly versus the U.S. Asia, in particular, stand to benefit if global trade tensions ease.
- Modest inflationary pressures and a normalization of real interest rates are supporting nominal interest rates.
- We favor U.S. equity sectors with both cyclical and secular tailwinds, like the new Communication Services Sector, while avoiding U.S. sectors with high economic or interest rate-sensitivity.
- Adjustments within the strategy’s U.S. equity allocation in Q3 tied to the creation of the Communication Services Sector did not reflect a change in our outlook or underlying exposures.
- While still underweight international equities, we modestly increased developed and emerging Asia exposure in Q3 as falling valuations this year improved the region’s risk/reward profile in our view.
- Emphasis of short-duration fixed income securities and avoidance of U.S. Utilities and Real Estate equities limit interest rate risk.
• U.S. Health Care Equities
• Emerging Asia Equities
• U.S. Treasury Securities
• U.S. Consumer Staples Equities
• U.S. Industrials Equities