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.  

Global Equity 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.
  • While European GDP growth should remain positive in 2019, major E.U. economies are seeing growth slow in the face of structural, cyclical, and political challenges.
  • Asia’s economic outlook is mixed, as signs of slow but improving economic trends in Japan contrast with economic deceleration in China, but Asian markets stand to benefit as trade tensions ease.

Portfolio Positioning

  • We favor U.S. sectors with both cyclical and secular tailwinds, like Information Technology and Communication Services, while avoiding more economically-cyclical and interest rate-sensitive sectors.
  • An underweight to Europe reflects our expectation that economic growth trends are unlikely to improve in the near-term.
  • We see better international opportunities in Asia, where modest growth expectations and low relative equity valuations have improved the region’s risk/reward profile.

Q4 Attribution

Positive Contributors:

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

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

Negative Contributors:

Underweight
• U.S. Utilities
• South & Central America

Attribution Analysis is relative to the MSCI ACWI (Net) Index 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 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.

U.S. Sector Portfolio Outlook, Positioning, and Attribution as of 12/31/2018

Outlook

  • 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.

Portfolio Positioning

  • 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.

Q4 Attribution

Positive Contributors:

Overweight
• Consumer Staples
• Health Care

Underweight
• Energy
• Industrials

Negative Contributors:

Underweight
• Utilities
• Real Estate

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’ U.S. Sector 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.

Large-Cap Core Equity Portfolio Outlook, Positioning, and Attribution as of 12/31/2018

Outlook

  • The U.S. continues on a trend of moderate economic growth, even as positive impacts from 2017 tax changes that helped extend the cycle 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.

Portfolio Positioning

  • We favor sectors that continue to benefit from a mix of positive secular and cyclical tailwinds, including Health Care, Information Technology, and Communication Services.
  • 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.

Q4 Attribution

Positive Contributors:

Overweight
• Consumer Discretionary
• Consumer Staples

Underweight
• Energy
• Industrials

Negative Contributors:

Overweight
• Financials

Underweight
• Utilities

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.