U.S. Balanced portfolio outlook, positioning, and attribution as of 03/31/2026
March 31, 2026
Outlook:
- While macroeconomic fundamentals suggest late-cycle economic growth can continue this year, the conflict in Iran has introduced market volatility and uncertainty.
- The degree to which economic fundamentals are impacted by the conflict over our investment horizon is, in our view, largely a function of duration.
- We believe the U.S. is better positioned, both compared to prior energy shocks and relative to other regions, to weather near-term supply disruptions of commodity supplies from the Gulf region, though a prolonged conflict could significantly increase recession risk.
- The U.S. consumer remains on solid footing, and while softer labor demand and low consumer expectations could hinder spending growth, we believe stimulus (particularly tax cuts) from the “One Big Beautiful Bill Act” can help offset near-term headwinds from higher gas prices.
- Private fixed investment tied to AI infrastructure has supported tech-focused areas of the economy, and while tech infrastructure spending growth could slow, we see potential for a broader range of business investment to help sustain slowing growth.
- Inflationary pressures and risks to growth from the Iran conflict have complicated the Fed’s rate-setting calculations, and expectations for rate cuts this year diminished sharply over Q1, but prior cuts have brought monetary policy to a relatively neutral stance, in our view.
Positioning:
- In our view, the evolving late-cycle economic environment, elevated geopolitical uncertainty, and rich valuations warrant a balance of defensive and select economically sensitive exposures.
- In large-cap U.S. equities, we are avoiding several most cyclical, early-phase sectors, but maintain Financials exposure, and we are overweight late-phase, defensive U.S. sectors.
- We remain overweight the late-phase, defensive sectors that we expect can outperform as growth slows, such as Health Care and Utilities.
- We also maintain opportunistic U.S. small-cap equity exposure, which we see as an increasingly attractive-yet-underappreciated part of the U.S. market.
- We maintain a relatively neutral allocation to fixed income, with emphasis on intermediate and longer-term Treasury exposure as well as shorter-term corporate exposure where we see less risk from a potential widening of credit spreads.
Q1 Attribution
Positive Contributors:
Overweight
- Small-Cap Equities
- Lg.-Cap Consumer Staples Equities
Underweight
- Lg.-Cap Information Technology Equities
Negative Contributors:
Overweight
- Lg.-Cap Financials Equities
Underweight
- Lg.-Cap Energy Equities
- Lg.-Cap Industrials Equities
Attribution Analysis is relative to the U.S. Balanced 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.
The information presented herein has been gathered from sources believed to be reliable, however data is not guaranteed. 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’ U.S. Balanced 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.