U.S. Sector portfolio positioning intra-quarter update as of 7/7/2022

As our outlook evolves, we have continued to position portfolios to balance risks and opportunities in a mid- to late-phase economic backdrop.

July 7, 2022


Eliminated early-phase Financials sector allocation

  • Sold remaining Financials sector ETF position

Increased allocation to late-phase sectors

  • Added to an existing Health Care sector ETF holding
  • Added new position in a Utilities sector ETF

The U.S. and global economic cycles continue to progress rapidly.  While we expect the U.S. economic expansion to likely extend into 2023, we have seen, as anticipated, signs of slowing growth in economic data.  In addition, 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 more rapidly than we expected in our base case earlier in the year.  In this evolving environment, we see increased risk to corporate earnings and, more broadly, to the performance of particularly economically sensitive parts of the financial markets.



Eliminated early-phase Financials sector allocation

  • We see increased risk that the economy shifts to a late-phase slowdown more rapidly than expected, which we believe would have an outsized negative impact on Financials, as interest rates could fall, capital markets activity could slow, and credit losses could increase.

Increased allocation to late-phase sectors

  • We believe the Health Care sector offers a favorable combination of reliable earnings growth at compelling absolute and relative valuations.
  • If recessionary risks increase further, we believe Health Care sector exposure provides attractive defensive characteristics with less risk from above-market valuations than certain other late-phase defensive sectors.
  • We view the Utilities sector as increasingly attractive, given the advancing economic cycle and rising recession risks.
  • The stability of the Utilities sector’s revenues and earnings leaves it well insulated, in our view, from mounting economic risks to broader market earnings estimates, justifying, in part, the sector’s above-average valuation.
  • Utilities companies, in our view, should also benefit from the ability to pass through higher fuel costs to customers in the current inflationary environment, while the sector’s domestic focus provides a cushion against foreign exchange and supply chain headwinds.

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’ U.S. Sector 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.

Portfolio outlook, positioning, and attribution
Portfolio positioning intra-quarter
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