Large-Cap Core Equity portfolio outlook, positioning, and attribution as of 12/31/2020
December 31, 2020
Outlook
- We expect economic recovery and expansion to continue in 2021, amid ongoing U.S. consumer strength and business investment as COVID-19 vaccinations help release pent-up demand in certain parts of the economy.
- The recovery has varied across the U.S. economy, with consumer spending on goods actually higher than pre-recession levels, while consumer spending on services remains below prior year levels.
- We anticipate positive equity market returns this year as rising earnings expectations for cyclical stocks should offset a likely decline in valuation multiples, which is typical early in a cycle.
- Sector allocation will be increasingly important in 2021, in our view, as the ongoing recovery and expansion drive a rebound in earnings for cyclical sectors and areas of the economy hardest hit by the pandemic, such as retail, travel, and leisure.
- While risks remain, we anticipate more economically-sensitive equity sectors will continue to benefit from early-phase cyclical tailwinds as earnings growth rebounds with economic recovery.
Portfolio Positioning
- We have continued to shift away from the relatively defensive portfolio positioning in place at the start of the COVID-19 crisis, while seeking to balance opportunity against ongoing medical, political, and economic risks.
- Since late Q1 2020, we have increased exposures to more economically-sensitive areas of the markets, including establishing allocations in the Financials, Industrials, and Energy sectors.
- We have continued to reduce exposure to less economically-sensitive sectors, most recently pairing back Consumer Staples exposure.
- We also maintain exposures to sectors benefitting from positive secular trends, like Information Technology and Communication Services.
Q4 Attribution
Positive Contributors:
Overweight
- Financials
- Industrials
- Health Care
Negative Contributors:
Underweight
- Information Technology
- Consumer Discretionary
- Consumer Staples
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.