Large-Cap Core Equity Portfolio Outlook, Positioning, and Attribution as of 9/30/2018

Outlook

  • 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.

Portfolio Positioning

  • 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.

Q3 Attribution

Positive Contributors:

Overweight
• Consumer Discretionary
• Information Technology

Underweight
• Energy

Negative Contributors:

Overweight
• Consumer Staples

Underweight
• Industrials

Attribution Analysis is relative to the S&P 500 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.
Attribution for Q3 2018 is based on sector categorizations in place prior to the end of September 2018. At the end of September 2018, Standard & Poor’s and MSCI reorganized their Global Industry Classification Standard (GICS) to create a new “Communication Services Sector.” This new sector combined the former Telecommunication Services Sector with media, advertising, and entertainment companies taken from the Consumer Discretionary Sector, and with certain internet and entertainment software companies taken from the Information Technology Sector.
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’ Large-Cap Core Equity 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.