- 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.
- 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.
• Information Technology
• Consumer Discretionary
• Health Care
• Consumer Staples
• Communication Services