Global Balanced portfolio outlook, positioning, and attribution as of 3/31/2020
March 31, 2020
Outlook
- The near-term economic impacts of the COVID-19 crisis will be severe, and global markets have reacted sharply, with stocks in just a few weeks down as much as seen in a typical multi-quarter bear market.
- Our macroeconomic outlook led us to relatively defensive portfolio positioning going into the crisis; now we are focused on balancing the continuing risks of the crisis with future opportunities.
- We believe there has been progress in creating conditions for a stock market bottom, but, the extent and duration of the economic impact, and in particular the labor market fallout, is still very uncertain.
- We anticipate longer-term U.S. interest rates are likely to rise from extremely low current levels as uncertainty eases amid eventual economic recovery, driven in part by significant monetary stimulus.
- A balanced approach to risk management is warranted, in our view, as we transition through what is likely to prove a major economic inflection point.
Portfolio Positioning
- After initially increasing the portfolio’s already-defensive tilt as COVID-19 began to spread, we began shifting in late March to a more balanced mix of defensive and economically-sensitive allocations in anticipation of an eventual market bottom.
- We added allocations to U.S. Financials, Industrials, and Energy equities, and we reduced overweights of U.S. Consumer Staples and Utilities equities.
- We increased overall U.S. equity exposure with the addition of a small/mid-cap allocation, while reducing Western European equity exposure, which tilted international equity exposure more toward emerging Asia.
- In the fixed-income allocation, we reduced duration after interest rates declined, but maintain an overweight of investment grade corporate securities.
Q1 Attribution
Positive Contributors:
Overweight
- U.S. Consumer Staples Equities
Underweight
- U.S. Financials Equities
- U.S. Energy Equities
Negative Contributors:
Overweight
- Investment Grade Corporate Bonds
Underweight
- U.S. Treasury Securities
- Emerging Asia 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.