Large-Cap Core Equity portfolio outlook, positioning, and attribution as of 9/30/2019
September 30, 2019
- The U.S. economic cycle is maturing – we expect U.S. economic growth to remain positive, though below trend, in the near-to-intermediate term as consumer strength is partly offset by weakness in manufacturing.
- Equity markets are likely to remain volatile, amid slowing growth and a mix of political and geopolitical uncertainty.
- The Federal Reserve’s recent short-term rate cuts should help normalize the yield curve, but are unlikely to spur a sustained reacceleration of economic growth.
- We believe moderate growth and an advanced economic cycle warrant exposure to sectors with a mix of cyclical and secular drivers as well as sectors with limited economic sensitivity.
- Information Technology and Communication Services should benefit from enterprise technology CapEx and ad spending as the economic cycle matures, as well as secular shifts toward cloud computing and digital advertising.
- Sectors like Consumer Staples, Health Care, and Utilities provide stable earnings growth potential that investors should find attractive amid economic deceleration and equity market volatility.
- We continue to avoid sectors with some of the highest economic sensitivity, such as Industrials, Materials, and Energy.
- Communication Services
- Consumer Staples
- Information Technology
- Health Care
- Real Estate