- The U.S. continues on a trend of moderate economic growth, even with a boost to Q2 GDP from temporary factors like exports.
- Data in Q3, including core retail sales and personal income growth, reaffirmed that the U.S. consumer remains healthy and a key driver of the economy.
- Trade disputes, along with constraints from progress already made this cycle, appear to be acting more as a governor on the economic throttle rather than an outright brake for the economy.
- Modest inflationary pressures and a normalization of real interest rates are supporting higher nominal interest rates and creating a headwind for certain interest rate-sensitive areas of the market.
- With the consumer acting as a key driver of economic growth, we believe exposure to consumer-focused U.S. equity sectors, such as Consumer Discretionary and Consumer Staples, is warranted.
- We favor sectors that continue to benefit from a mix of secular and cyclical trends, including Health Care, Information Technology, Communication Services, and Financials.
- We are avoiding the most economically-cyclical sectors, such as Industrials, Materials, and Energy; as well as the interest rate-sensitive Real Estate and Utilities Sectors.
• Consumer Discretionary
• Information Technology
• Consumer Staples