U.S. Equity Strategy 4Q 2018


Key Takeaways

  • U.S. equity markets faced significant pressure as volatility escalated in the fourth quarter. With the exception of utilities, every sector in the S&P 500 Index posted negative returns. Our U.S. Equity strategy delivered a negative return and outperformed the benchmark for the quarter. For the full year 2018, our strategy was flat and outperformed a down market.
  • Our investments in the information technology sector had the most significant impact on our relative returns due to our lower exposure and stock selection. Our lack of exposure to energy benefitted the strategy as energy was the weakest sector in the S&P 500, returning -23.78%. We generally avoid investing in the energy space due to the inconsistency and lack of predictability of earnings over time. Our lack of exposure to utilities was the only noteworthy drag on attribution.
  • As bumpy as the stock market ride has been of late, volatility could intensify this year as we enter the later stages of the business cycle for the U.S. economy. As growth becomes scarce and risks increase, we aimed to position the strategy for durability by adding to our high conviction holdings where we believe a momentum-driven market failed to adequately reward earnings strength and by adding new names that exhibit the consumer staples-like stability we look for, but with quicker growth.
  • With unrelenting discipline, we remain sharply focused on bottom-up research in pursuit of stable, quality growth companies at reasonable prices. Importantly, the long-term earnings outlook for our portfolio companies, which ultimately determines the trajectory of stock prices, is intact. Despite the doom and gloom among investors, we are starting 2019 on an optimistic note

Trailing Returns: U.S. Equity Composite(As of 12.31.2018)

Calendar Year Returns

Source: NorthernTrust
All results portrayed are expressed in U.S. dollars.
Past performance is not necessarily indicative of future results. For full disclosure and for further information regarding comparison to an index, see the Disclaimer and Performance Disclosure.

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