Australian stocks materially underperformed its global counterpart as the ASX lagged in its pricing of higher-than-expected inflation and tighter monetary policy. This lag was reflected in the 10-year bond yields rising 59bps to 2.08%1, with a corresponding flattening of the yield curve as the market brought forward expectations of a rate hike by the Reserve Bank of Australia. Technology was the best performing sector, with a gain of +2.4% and again the rise was likely supported by lower real yields. Gold stocks also performed strongly, reversing some prior month underperformance.
The State Street Australian Equity Fund underperformed the S&P/ASX 300 Index during October. The underperformance was largely driven by negative stock selection within Financials (not holding Macquarie, NAB and being overweight AUB Group), Metals & Mining (Rio and Mineral Resources) and Health Care (Ansell, Fisher & Paykel Healthcare and not holding CSL). On the other hand, good stock picking within Discretionary and Real Estate were key contributors towards relative performance. Stocks that appeared more attractive on Value measures typically underperformed during the month, as cheap Industrials and Miners lagged on the back of a flattening yield curve.
1Source: Factset as of 31 October 2021.
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References to the State Street Australian Equity Fund ("the Fund") in this communication are references to the managed investment schemes domiciled in Australia, promoted by SSGA Australia, in respect of which SSGA, ASL is the Responsible Entity. This general information has been prepared without taking into account your individual objectives, financial situation or needs and you should consider whether it is appropriate for you. You should seek professional advice and consider the product disclosure document and target market determination, available at www.ssga.com, before deciding whether to acquire or continue to hold units in the Funds.
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Source: Bloomberg Finance, L.P., SSGA as at 31 October 2021. Past performance is not a reliable indicator of future performance. This information should not be considered a recommendation to buy or sell any security or sector shown. It is not known whether the securities or sectors shown will be profitable in the future. Characteristics are as of the date indicated, subject to change, and should not be relied upon as current thereafter. Index returns are unmanaged and do not reflect the deduction of any fees or expenses. Index returns reflect all items of income, gain and loss and the reinvestment of dividends and other income.
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