Global Equity portfolio positioning intra-quarter update as of 02/13/2024

We continue to see two potential paths for the U.S. economy–either a slowdown with a risk of recession or a “soft landing” with moderate growth that extends the economic cycle. Given ongoing resilience of some economic data and potential for monetary policy easing, we have made portfolio adjustments to modestly increase expected economic sensitivity and take advantage of opportunities and challenges we see in specific areas of the market.

February 13, 2024


Added new allocation to U.S. Financials sector

  • Added new U.S. Financials sector ETF holding

Reduced late-phase U.S. sector exposure

  • Trimmed existing Consumer Staples sector ETF holding

Portfolio rebalance

We have added an allocation to the U.S. Financials sector, which we believe should benefit from easing monetary conditions, continued economic growth, increased capital markets activity, and secular trends such as the shift to digital payments.  We continue to avoid other early-phase, economically sensitive U.S. sectors, as we believe a reacceleration to sustained above-trend economic growth is highly unlikely in the U.S. at this point in the cycle.  At the same time, we reduced our overweight of the U.S. Consumer Staples sector, where we see specific risk to earnings growth and valuations in the current disinflationary environment, but we retain an overweight of late-phase, defensive U.S. sectors in aggregate.  We also rebalanced portfolios.


Added new allocation to U.S. Financials sector

  • Continued economic growth, in addition to prospects for easier monetary policy, could introduce potential tailwinds for the U.S. Financials sector.
  • While near-term earnings expectations for banks (approx. 25% of sector market cap.) are subdued, we believe the prospect of lower interest rates, combined with the current strength of bank balance sheets (particularly among large banks) mitigates industry-specific risks that have weighed on U.S. bank earnings expectations and valuations.
  • Similarly, we believe revenue and earnings in the Capital Markets industry are positioned to rebound following two years of weak dealmaking and underwriting activity that pushed industry earnings down more than 20%.
  • We expect Financial Services, the largest U.S. Financials industry by market cap, should continue to benefit from secular growth trends for credit card and payments companies, and the Insurance industry should benefit from increasing premiums and a reversal of underwriting losses that followed the economic reopening.

Reduced late-phase U.S. sector exposure

  • Moving to a smaller overweight of the Consumer Staples sector reflects the potential for continued growth in the U.S. economy and the relative opportunity we see in Financials.
  • U.S. Consumer Staples is expected to see a slower pace of earnings growth in 2024 than other late-phase U.S. sectors, despite trading at a higher relative valuation.
  • We see specific risks to earnings expectations in the Food and Beverage industries, where an expected rebound in volumes and above-average pricing could prove challenging in a disinflationary environment.
  • Valuations for U.S. Consumer Staples industries where we see more favorable fundamentals (e.g., Distribution & Retail) have reached levels well above long-run averages, reducing the return potential we see going forward.

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.

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