Large-Cap Core Equity portfolio outlook, positioning, and attribution as of 6/30/2020
June 30, 2020
- 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 consumers and businesses, as well as attractive interest rate-adjusted equity valuations, should set the stage for continued equity market gains during the recovery.
- Risks to the 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.
- 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 Financials and Industrials allocations and maintained the Energy allocation established in late Q1, each of which we expect to benefit from economic recovery.
- 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 reduced exposure to the defensive Health Care sector and eliminated a relatively defensive holding from the portfolio’s Communication Services sector exposure, but believe continued uncertainty in this period of economic inflection still warrants exposure to defensive sectors.
- Information Technology
- Real Estate
- Health Care
- Consumer Discretionary