U.S. Sector Index portfolio positioning intra-quarter update as of 04/06/2026
The U.S. economy has maintained relatively steady late-cycle growth, despite near-term uncertainty and market volatility, and we see signs that certain cyclical industries can resume more normal growth patterns after several years of stagnation. We have added transportation exposure while modestly reducing our defensive allocation.
April 6, 2026
ACTIONS and OVERVIEW:
Initiated Transportation industry allocation
- Added new Transportation industry ETF holding
Reduced Consumer Staples sector allocation
- Trimmed existing Consumer Staples ETF holding
The U.S. economy slowed modestly in 2025, but growth overall remained trend-like, despite noise associated with shifting U.S. trade policy. Data year-to-date and our internal analysis suggest the U.S. economy remained on a steady path in Q1 2026, even as the Iran conflict injected uncertainty and market volatility. We believe conflict de-escalation and normalization of global trade are achievable well within our investment horizon of 6 to 18 months. Thus, our outlook continues to contemplate trend-like growth in the U.S.
We have also seen signs that certain areas of the U.S. economy, particularly manufacturing and industrial activity, had begun to resume normal growth patterns after years of flat-to-negative growth. We believe fiscal policy factors and lagged effects from monetary easing in 2025 can provide ongoing support to select industries. As such, we have added a new Industrials allocation focused in the Transportation industry, funded by a reduction in Consumer Staples exposure. We retain a balance of defensive and select economically sensitive exposures, while still avoiding some of the most economically-cyclical large-cap sectors.
UPDATE DETAIL:
Initiated Transportation industry allocation
- While the U.S. economy has remained resilient in a late-cycle expansion driven by fiscal support and tech-related investment, many cyclical industries have seen a prolonged downturn that depressed earnings and expectations.
- Transportation, specifically, faced sustained headwinds over the past several years from restrictive monetary policy and weak goods demand after the initial post-COVID recovery.
- We now see improving trends across key manufacturing indicators like industrial production, the ISM Manufacturing PMI, and real core capital goods orders, which we believe should support volumes and Transportation fundamentals.
- Industry capacity has continued to rationalize, particularly in trucking, amid stricter enforcement of driver qualification and compliance standards, contributing to a rebound in freight rates that we view as a tailwind to earnings.
- We believe Transportation offers efficient cyclical exposure to improving manufacturing dynamics at a discount to the broader Industrials sector and has potential for more fundamental gains amid de-escalation of the Iran conflict.
Reduced Consumer Staples sector allocation
- Since late 2025, Consumer Staples has seen one of the sector’s strongest historical periods of outperformance outside of recession, with its valuation rising to a significant premium to the S&P 500, while other defensive sectors (Utilities and Health Care) present more favorable earnings growth prospects and valuation discounts to the market.
- Certain industries (e.g., Food & Beverages) face headwinds to volume growth after several years of outsized pricing gains and could now see margin pressure rising costs on inputs, such as aluminum and agriculture commodities.
- Consensus estimates anticipate Consumer Staples sector earnings growth will annualize about 7% through 2027 versus 16% for the S&P 500, which reduces the relative appeal of Staples, in our view, if economic uncertainty and market volatility ease with de-escalation in the Middle East.
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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. Sector Index 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.