Large-Cap Core Equity Portfolio Outlook, Positioning, and Attribution as of 3/31/2019

Outlook

  • Our outlook for moderate U.S. economic growth remains intact, while some late-cycle signs of slowing growth affirm our view that a sustained economic reacceleration is unlikely.
  • Volatility is likely to continue as sentiment shifts in a moderate economic growth environment can play an outsized role in short-term market movements.
  • Sector selectivity will be increasingly important going forward.
  • The risk of rising interest rates has moderated, as inflation pressures have eased somewhat and the Federal Reserve has hit pause on rate hikes.

Portfolio Positioning

  • Moderate growth and an advanced economic cycle warrant exposure to sectors with a mix of cyclical and secular drivers, as well as sectors with limited economic sensitivity.
  • We favor sectors that continue to benefit from a mix of positive secular and cyclical tailwinds, including Information Technology, Health Care, and Communication Services.
  • We are avoiding the most economically-cyclical sectors, such as Industrials, Materials, and Energy.
  • In Q1, we modestly reduced the economic sensitivity of the portfolio by reducing Financials exposure and adding Utilities exposure.

Q1 Attribution

Positive Contributors:

Overweight
• Information Technology
• Consumer Discretionary

Underweight
• Financials
• Utilities

Negative Contributors:

Overweight
• Health Care
• Consumer Staples
• Communication Services

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.
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.