Large-Cap Core Equity portfolio outlook, positioning, and attribution as of 09/30/2025
September 30, 2025
Outlook:
- While we continue to observe late-cycle economic conditions in the U.S., following a slowdown in the first half of the year, we also see a path towards a continuation of the economic cycle as policy focus shifts toward more stimulative measures such as tax cuts and deregulation.
- The combination of protectionist trade policy, cuts to government spending and jobs, diminished private sector hiring, and sluggish disposable income growth reduces the likelihood of a sustained reacceleration in growth, in our view.
- We see healthy corporate earnings growth as providing support for the U.S. equity market, driven in part by ongoing AI infrastructure investment, though elevated valuations may be a headwind to further upside.
- The U.S. consumer has limited capacity to accelerate spending from here, in our view, as labor demand has weakened and the savings rate remains low, but with stabilizing sentiment, strong equity markets, as well as healthy household and business balance sheets could allow for the use of credit and re-leveraging to drive continued spending and business investment.
- With the Federal Reserve on a path toward policy recalibration, we believe the yield curve re-steepening process can continue, for now, as resilient economic growth in the intermediate term and stubborn inflation could limit the downside to longer-term interest rates.
Portfolio Positioning:
- In our view, the evolving late-cycle economic environment, elevated policy uncertainty, and rich valuations warrant a balance of defensive and select economically sensitive sector exposures.
- We are avoiding several of the most cyclical early-phase sectors, but retain exposure to Financials and Real Estate, which we see benefitting from a steeper yield curve and monetary policy recalibration.
- We maintain significant exposure to mid-phase sectors, which provide a mix of economic sensitivity and exposure to strong secular growth trends.
- We are overweight the late-phase, defensive Health Care and Consumer Staples sectors that we expect can outperform as growth slows.
Q3 Attribution
Positive Contributors:
Overweight
- Health Care
- Consumer Staples
Underweight
- Industrials
Negative Contributors:
Overweight
- Information Technology
- Financials
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.