A volatile 2023 ended on a cautiously positive note, as developed market (DM) central banks reached the end of their tightening cycle and signaled that some relief on rates was not too far off. Global economic activity edged higher towards end-2023. Service sector activity rose whereas manufacturing remained in decline. Inflation continued to decline during the quarter. During 2023, global growth slowed at divergent rates across key economies – growth in the United States outpaced expectations but disappointed elsewhere.
The State Street Global Equity Fund outperformed the MSCI World ex Australia Index during December.1 Our Alpha model performance was down in December, with negative contribution from Sentiment factors followed by Catalyst, Quality and Value. From a country and sector perspective, good stock picking within Canadian Consumer Staples and US Consumer Discretionary sectors were key contributors towards relative performance. On the other hand, poor stock selection in US Health Care and US Tech were the key detractors. Currency hedging contributed 1.76% during the month.
During December, we made minor adjustments to the overall portfolio with the aim of improving expected risk-adjusted returns. The rebalance involved slightly increasing our exposure to select names in the Homebuilding industry with Consumer Discretionary, notably Lennar Corp on the back of increasing Quality and Catalyst scores and Pulte Group – which has seen notable improvement in its Sentiment scores. At the same time, we reduced our exposure to Semiconductors – such as AMD as valuations are becoming less compelling.