- 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 sectors is warranted.
- Health Care, Information Technology, Communication Services, and Financials should benefit from a mix of secular and cyclical trends.
- We are avoiding economically-cyclical sectors, such as Industrials and Energy; and interest rate-sensitive sectors like Utilities.
- Portfolio adjustments at the end of Q3 tied to the creation of the Communication Services Sector did not reflect a change in our outlook or underlying exposures.
• Health Care
• Real Estate
• Consumer Staples