We favor the Energy sector, as we expect secular supply constraints to persist for some time and ultimately see higher prices for the underlying commodities into 2023. Valuations are also attractive in our view, and although capital returns could moderate somewhat relative to 2022, the sector’s dividend yield remains well in excess of the S&P 500 Index. Within this sector, we prefer Integrated Oil and Gas companies that have strong capital bases and a positive relationship with commodity price levels. We prefer market-weight allocations to the Consumer Staples and Utilities sectors due to the earnings stability these sectors are likely to achieve during an economic downturn. Within Consumer Staples, we expect Food and Staples Retailing to benefit from aggressive inventory reduction and to gain market share as consumers become increasingly value-conscious. We are neutral to unfavorable on the majority of cyclical sectors but would note that these sectors provide potential opportunities for investors looking to maintain balance within portfolios. More defensive sub-industries would include Defense Contractors within Industrials, Property and Casualty Insurance within Financials, Industrial Gases within Materials, and Automotive Retail within Consumer Discretionary. On the other hand, with an eye toward an eventual recovery, we continue to favor Railroads in Industrials, Internet Retail within Consumer Discretionary, and Universal Banks within Financials. Our overall sector positioning likely will shift from a more quality and defensive posture to a more broadly cyclical one in 2023 as markets look through the recession to the recovery and rebound. 2023 Outlook | 11