- The U.S. continues on a trend of moderate economic growth, even as positive, cycle-extending impacts from 2017 tax changes fade.
- Positive employment and wage trends in the U.S. should support continued healthy consumer spending in 2019.
- Strong earnings growth in 2018 and the recent market pullback have combined to make valuations attractive amid moderate economic growth.
- Many current risks are typical of a late-stage expansion, like cost pressures and the flattening yield curve; and markets have already reacted sharply to some risks specific to this cycle, like the U.S. trade dispute with China and general political uncertainty.
- We favor sectors that continue to benefit from a mix of positive secular and cyclical tailwinds, including Communication Services, Information Technology, and Health Care.
- With the consumer acting as a key driver of economic growth, we believe exposure to consumer-focused sectors, such as Consumer Discretionary and Consumer Staples, is warranted.
- 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 Staples
• Health Care
• Real Estate