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State Street ETF Model Portfolio Year in Review and 2023 Outlook

Sinead Schaffer and Peter Carey discuss what's happened over the last 12 months and how the State Street ETF Model Portfolios have performed.

03 January 2023

Sinead Schaffer

ETF Model Portfolio Strategist

Peter Carey, CFA

Portfolio Manager

Our Model Portfolio Strategist and Portfolio Manager look back at the last 12-months and discuss how the State Street ETF Model Portfolios have performed.

Schaffer: Today we discuss all things related to the State Street ETF Model Portfolios. And joining me for today's discussion is Peter Carey, our Senior Portfolio Manager from the Investment Solutions Group. Thank you Pete. Pete, to start the discussion. Why don't we set the scene what's happened over the last 12 months and how have the State Street ETF Model Portfolios performed?

Carey: Thanks, Sinead. No doubt 2022 has been a difficult investment environment with negative returns seen across the vast majority of asset classes. The Ukraine-Russia crisis, which started earlier in the year, resulted in an energy crisis which exacerbated this strong inflationary returns we started to see the end of 2021. Central banks, which were dovish, have had to move hawkish very quickly, resulting in the aggressive rate hiking cycle that we find ourselves in today. The good news, however, as our diversified model portfolios have been able to weather the store and outperform their peers in other more traditional asset allocations. Specifically, we've managed to avoid the significant losses we've seen in some asset classes such as real estate, global fixed income, our smart be to ETF QMIX has outperformed traditional market cap indices and positively our Australian exposure has done really well relative to other regional equity indices. So overall we've helped mitigate those negative returns and we're well positioned heading into 2023.

Schaffer: That's great to hear. I think you've kind of jumped ahead of us here a little bit, Pete, but, but why don't we kind of get into what are our expectations for 2023?

Carey: We think we're going to see continuing slowing growth. We think that central banks are likely to raise rates in the short term, but we do think there are some silver linings out there. Inflation, which has been a very big topic this year, should improve significantly in 2023. We think we're about to head into a big period of disinflation movement from very high levels of inflation we've seen this year to levels which are a bit more acceptable for central banks. We also think we'll see an improvement in emerging markets off the back of an improving China, and we also think we're going to see some improvements in geopolitics. So there are risks, but I think we're on balance better heading into 2023 than we were in 2022.

Schaffer: So what does this mean then for the State Street ETF Model portfolios in 2023?

Carey: Well, I think our asset allocation should benefit from this type of environment. Our exposure to EM through that improving China profile should benefit Australia, which does have a big exposure to China and also a better economic landscape relative to other economies. Our international equity ETF, QMIX should benefit from their strong exposures to value, quality and low volatility factors. And we actually started to see some value in fixed income after material increase in rates we've seen this year. So overall, our diversified model portfolios should be well positioned to benefit from an improving landscape.

Schaffer: Thank you, Pete. And thank you for joining us to hear about the State Street ETF Model Portfolios.

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