Global Equity portfolio outlook, positioning, and attribution as of 6/30/2020
June 30, 2020
Outlook
- We believe a U.S. economic recovery is underway, and that it is tracking ahead of our expectations from early Q2.
- U.S. retail spending data is improving faster than retail traffic data, and U.S. consumers have amassed significant savings that we believe could fuel continued consumption growth.
- Over the intermediate term, we believe significant fiscal and monetary support for U.S. consumers and businesses, as well as attractive interest rate-adjusted equity valuations, should set the stage for continued equity market gains during the recovery.
- The prospects for international economies are less clear, in our view, as Europe was already facing greater challenges before the crisis and is also very reliant on tourism, while many Asian economies rely on global trade, which remains constrained.
- Risks to the U.S. economic and market recovery remain, including the potential for resurgent infection rates to slow or derail the recovery, a slowdown in consumer spending after record fiscal stimulus boosted trends, and for non-COVID issues, like the 2020 election, to impact investor sentiment.
Portfolio Positioning
- We have continued to shift away from the defensive portfolio positioning we had in place at the start of the COVID-19 crisis, while seeking to balance opportunity against ongoing medical, political, and economic risks.
- We increased economically-sensitive U.S. Financials and Industrials allocations and maintained the Energy allocation established in late Q1, while reducing U.S. Health Care exposure and eliminating the U.S. large-cap Utilities allocation, but we believe continued uncertainty in this period of economic inflection still warrants exposure to defensive sectors.
- Technology-related sector exposures are warranted, in our view, regardless of the exact shape of the economic recovery, given the secular tailwinds benefiting these sectors.
- We continue to underweight international equities, given the relative opportunities we see in the U.S. and risks abroad, with a tilt toward Emerging Asian markets within the international allocation.
Q2 Attribution
Positive Contributors:
Overweight
- U.S. Communication Services
Underweight
- Western Europe
- U.S. Real Estate
Negative Contributors:
Overweight
- U.S. Health Care
- U.S. Consumer Staples
Underweight
- U.S. Information Technology
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.