Shifting 1000 basis points of allocation from cyclical to defensive sectors. Sector model recommendations, very broad outperformance from defensive sectors in June, and NDR moving equities to marketweight were the impetus to make the moves. In the process, we downgrade Technology to marketweight, Industrials and Materials to underweight, while lifting Consumer Staples and Real Estate to overweight. The moves could be seen as short-term or tactical if it looks like the market is following the typical mid-term election year pattern of being weak until mid-October and then having a strong rally through year-end. However, defensive sector long-term mean reversion trends and a 10-2 yield curve less than 40 basis points from inversion argue that we are late cycle when defensive sector exposure should be maintained.
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