Global Conservative portfolio positioning intra-quarter update as of 3/3/2020
Reduced international equity exposure; modestly increased favored U.S. equity sector allocations
March 3, 2020
With the COVID-19 coronavirus spreading around the globe, we have modestly adjusted our global portfolios by reducing international equity exposure, which we view as more vulnerable to economic impacts from the disease and related policy actions. We have redeployed proceeds across favored U.S. equity sector exposures, which we believe are collectively positioned more defensively than our global benchmark.
Reduction of international exposure: COVID-19’s economic impacts have been most concentrated in Emerging Markets to this point; going forward, we believe developed economies will experience increased negative economic and earnings impacts, but that the risks are higher for international developed markets as compared to the U.S. Developed Europe and Developed Asia, which were already on weaker economic footing than the U.S., in our view, are vulnerable to the negative economic impacts of a broader outbreak and related mandatory or self-imposed public health measures.
Additions to favored U.S. equity sector exposures: We believe the U.S. has greater ability to weather the economic headwinds COVID-19 presents, given its relative economic strength, and has greater options for fiscal and monetary policy responses to mitigate potential economic impacts from the outbreak. Our U.S. sector exposure, which is already defensively positioned with overweights of Consumer Staples, Health Care, and Utilities, as well as avoidance of the more economically-sensitive sectors, should be less susceptible than international equities to negative economic, earnings, and market impacts.
Portfolio rebalance: Given these adjustments and position deviations from target weightings due to recent market movement, we have taken this opportunity to implement a rebalance of portfolio positions.