Large-Cap Core Equity portfolio outlook, positioning, and attribution as of 6/30/2022
June 30, 2022
- The U.S. and global economic cycles continue to progress rapidly. We expect the U.S. economic expansion to extend into 2023, but we have seen, as anticipated, signs of slowing growth in economic data.
- We believe the Federal Reserve’s recent shift toward more aggressive monetary tightening has exacerbated risks that the economic cycle could progress toward a late-phase slowdown.
- In this evolving environment, we now see increased risk to corporate earnings and, more broadly, to the performance of particularly economically sensitive parts of the markets.
- We expect earnings growth to vary significantly across U.S. sectors in 2022, as is typical during economic transitions and deceleration, and we believe sector allocation will be key to investment outcomes in the coming quarters.
- We have moved to a significant underweight of early-phase cyclical sectors, reducing exposure to Financials and Energy and continuing to avoid Industrials, Materials, and Real Estate.
- We have increased our overweight of the mid-phase Information Technology and Communication Services sectors, which we believe will benefit from positive secular earnings drivers and see less deceleration in revenue and earnings growth than more cyclical sectors.
- We have increased exposure to late-phase, defensive sectors by increasing our overweight of Health Care.
- Consumer Discretionary
- Health Care
- Communication Services
- Consumer Staples