Global Balanced Portfolio Outlook, Positioning, and Attribution as of 12/31/2018

Outlook

  • Global economic growth should continue in 2019, despite headwinds from trade disputes, with positive momentum in the U.S. and mixed economic trends internationally.
  • Strong earnings growth in 2018 and the recent market pullback make U.S. valuations attractive amid moderate economic growth.
  • European GDP growth should stay positive in 2019, but major E.U. economies are seeing growth slow; while Asia’s economic outlook is mixed, Asian markets stand to benefit as trade tensions ease.
  • Longer-term U.S. interest rates should reverse some of their recent pullback as investors’ concerns over economic growth abate.

Portfolio Positioning

  • We favor U.S. equity sectors with both cyclical and secular tailwinds, like Information Technology and Communication Services, while avoiding more economically-cyclical sectors, like Industrials and Energy.
  • We continue to underweight European equities, where economic growth trends are unlikely to improve in the near-term; we see better international opportunities in Asian equities, where declining relative valuations have improved the region’s risk/reward profile.
  • Emphasis of short-duration fixed income securities and avoidance of U.S. Utilities and Real Estate equities limit interest rate risk.

Q4 Attribution

Positive Contributors:

Overweight
• U.S. Consumer Staples Equities
• U.S. Health Care Equities

Underweight
• U.S. Energy Equities
• U.S. Industrials Equities

Negative Contributors:

Underweight
• U.S. Utilities Equities
• U.S. Treasury Securities
• South & Central American Equities

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.