Large-Cap Core Equity portfolio outlook, positioning, and attribution as of 9/30/2020
September 30, 2020
Outlook
- We expect economic recovery and expansion to continue, as fiscal support has more than offset aggregate income losses and, thus, we believe provides a bridge for consumption into 2021.
- The recovery has varied across the U.S. economy, with consumer spending on goods returning to pre-recession growth, while industrial production is rebounding but remains below prior year levels.
- Despite a significant stock market rebound, we believe U.S. equity valuations remain attractive compared to history when adjusted for the record low level of long-term interest rates.
- While risks remain, we anticipate more economically sensitive equity sectors will 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, 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.
- While we maintain exposures to sectors benefiting from positive secular trends, like Information Technology and Communication Services, we have increasingly shifted focus toward sectors we expect to benefit from cyclical tailwinds but which have lagged year-to-date.
Q3 Attribution
Positive Contributors:
Overweight
- Industrials
- Communication Services
Underweight
- Information Technology
Negative Contributors:
Overweight
- Energy
Underweight
- Consumer Discretionary
- 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.